Claiming R&D in Construction Projects
“It’s just what we do”
“Problem solving is part of our job”
“We’re not a research and development company”
Despite the fact that many construction firms spend vast amounts of time and resources developing solutions for better, smarter, stronger, greener and more cost-effective designs and structures, it’s often the view that innovation is just ‘another day at the office’.
But here at R&D Tax North West, we say, “why should our industrious UK construction companies leave their well deserved credit with the taxman when they could claim for Research and Development (R&D) tax relief?”
Could Your Construction Activity be Eligible for R&D Tax Credits?
It’s true that the construction industry is a multifaceted entity, just a brief look at any Building Information Modelling plan will show you the level of detail and variety of disciplines involved to produce a structure from inception to construction.
So within this complex web of designs and plans, where does research and development fit; and more importantly, does it fit within your company allowing you to claim R&D tax credits?
So first let’s consider the projects you have worked (are working) on. What evidence is there that you can claim R&D tax relief?
Criteria for Claiming R&D Tax Credits in Construction:
First of all; have you met a significant challenge in the project?
A challenge that would require that your business identify a solution or advance where there is no clear technological or scientific solution? Is there more than one potential solution? Are you unsure if the project will achieve the required outcome?
If you’ve answered yes, then this may mean that research and development is required in finding a solution. This may involve taking a risk; investing in your own resources and time to research the problem and test solutions.
A good indication that you are working on research and development is that you’ve needed specialist skills to understand an issue that hasn’t previously been resolved. Or perhaps you are improving an existing product or process but are unsure of the outcome without appropriate testing. Some examples of this could be research in:
- Developing a tailor-made solution to reduce waste and improve the environment
- A new methodology that produces structures more economically
- Processes for effective off-site assembly and transportation
- Creating better efficiencies with plumbing or electrical designs
- Innovative solutions to help a structure withstand a particular element, such as flooding, fire, earthquakes or unstable ground.
- New ways to build in areas with restricted space
- Developing new equipment, tools and products
- Design of a new scaffolding, or roof system
The list goes on, yet many new innovative solutions remain unclaimed.
Check it in the Small Print
Love them or hate them, there is one thing that abounds in the construction industry and that’s contracts.
However, when it comes to R&D, contracts may be the key to identifying if you are eligible to claim.
For example, a contract with significant performance guarantees or indemnity clauses may point to the idea that the project holds many technological uncertainties . This could suggest that R&D may be required to overcome these uncertainties.
To claim R&D tax credits, your business would normally need to hold the rights to the solution and results of the research conducted (i.e. work to find a solution was done at your risk and wasn’t funded by your client or customer).
As we all know contracts aren’t always so straightforward, and at times contractors and consultants may be able to claim – depending on who created the designs or processes, why the work was done and who took the risk.
Deciding exactly who can make the claim for R&D tax credits can be quite involved as it depends not only on the nature of the contract but also whether the companies involved are SMEs or Large Companies, part of a larger group or some combination.
As a rule, it is generally considered that if you develop new innovations, engineering designs and processes in-house, then you are more likely to be eligible to claim R&D tax relief, even if the outcome of the research was deemed unsuccessful. Thankfully, the expert team at R&D Tax North West are able to analyse contracts and provide professional advice on your eligibility for R&D tax relief.
So whether your part in construction lies in architecture, engineering, information technology, manufacturing, landscape or general contracting – there is a chance that research taking place (even spread across different roles of your organisation) could be eligible for R&D Tax credits.
However if you don’t ask – you’ll never know. So contact R&D Tax North West today to determine your potential for R&D Tax relief now and for future activities.