As of 1 April 2015 the research and development tax relief rate increased by 5 per cent to 230 per cent for SMEs, and the R&D expenditure credit for large companies increased by 1 per cent to 11 per cent.
However, thousands of construction companies are still missing out on major tax savings because they’re unaware of what constitutes R&D, or don’t know how to submit a claim.
The R&D tax relief scheme in the UK is extremely generous and globally competitive, offering SMEs and larger companies the opportunity to claim back significant amounts of money as R&D tax benefits.
However, there are two major barriers that prevent many construction companies from making the claims they’re entitled to.
The first is simply awareness of the scheme.
A lot of construction companies are unaware that it exists, or do not think they undertake R&D, and therefore do not seek to claim any tax relief for it.
The reality is that construction companies innovate in many aspects of their work.
As an example, one company claimed for the development of a sophisticated scaffolding design that allowed them to work safely in difficult conditions.
Their bespoke solution represented a genuine technological advancement and brought additional benefits not offered by existing scaffolding designs within the industry.
Consequently, they were able to make several claims for challenging projects of this nature, and access over half a million pounds of R&D tax benefit over a two-year period.
The second barrier is the perceived complexity of the legislation governing R&D tax relief.
The UK tax system is widely considered to be awkward and time-consuming.
“A period of continuity would improve understanding and increase claim rates”
We would like to see a simpler system developed, that awards tax relief to innovative companies more quickly.
We also feel that the continued changing of eligibility criteria for R&D tax relief is unhelpful.
A period of continuity would improve understanding and increase claim rates.
Through their new voluntary advanced assurance scheme, HMRC is seeking to increase the support available for companies.
The aim is to provide greater certainty for companies about their claim earlier.
While we wholly support enabling activity, we have concerns about the resource that can be allocated to this initiative.
Over the past 18 months, HMRC has undergone restructuring, resulting in the closure of two specialist R&D units.
We deal with HMRC inspectors daily, and are very aware of the constraints placed upon them.
This initiative will not be a success without additional government investment in new staff and training.
Our message to the construction industry is very simple: you must act now.
Our experience is that companies which invest in understanding their R&D tax relief entitlement are typically repaid many times over.
No business would willingly give their competitors a commercial advantage, but many continue to ignore R&D tax relief, while their competitors benefit.
“Our message to the construction industry is very simple: you must act now”
The UK has a rich history of construction innovation and long may it continue.
Even more must be done to reward the innovators that stimulate growth and continue to aid our economic recovery.
Innovation powers our company too, so we understand the challenges that innovators face.
We believe a bold, long-term strategy is now needed from the government to challenge the myths about R&D tax relief head on.
We should strive for a future in which every pound of R&D tax relief is identified and claimed.
Jennifer Tragner is R&D tax director at Alma Consulting Group