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R&D tax relief claims by construction firms rise by a quarter

New statistics from HMRC have revealed there was a 26% year-on-year rise in the number of claims for research & development tax credits submitted by construction firms in 2014-15.

The latest data shows that construction companies submitted 480 claims for research and development tax credits in 2014-15, up from 380 in 2013-14. The total amounts claimed in the period rose from £20m to £35m, a rise of 75%.

First introduced in 2000, R&D tax credits are designed as a tax relief to encourage greater R&D spending and innovation. They work by reducing a company's tax bill by an additional amount depending on the company's allowable R&D expenditure. Since launch, over 140,000 claims have been made, with almost £14bn claimed in tax relief.

Over time the rate of relief has become more generous and is now worth up to 230% for SMEs. This means that for each £100 of qualifying costs, the corporation tax paid by SMEs on income could be reduced by an additional £23.

Commenting on the figures, Kelly Boorman, head of construction at RSM said: "With an increase in R&D claims of 26% in the construction sector and an uplift of 75% in claim value, the sector appears to have recognised the R&D element in building innovation.

"With more emphasis on working 'green' and gaining efficiency through innovation, projects involve more R&D than ever. Given the increase in the use of BIM technology and the trend towards seeking alternative environmentally friendly solutions, we expect to see a continued rise in both claim rates and values.

"The significant increase in claims in the sector seen in today's figures demonstrates that there has been a fundamental change in perception. However, far too often we find that many companies working in the sector still do not recognise the R&D opportunities they have. These include research completed to submit in tenders, building and infrastructure design, ground work innovations and alternative environmentally friendly products.

"Construction companies should regularly review their activities and examine their eligibility for R&D tax incentives. This should involve challenging pre-conceptions that the business is not 'doing' R&D, or that the value of the R&D expenditure is too low to warrant a claim.

"There is nothing to lose, and potentially much to gain."

T: +44 (0)20 3201 8000
W: www.rsmuk.com

16th September 2016