R&D tax credits for the construction industry

What qualifies as R&D in the construction and built environment sector?

The definition of R&D for tax purposes is far broader than many businesses realise. These are some examples of the range of projects that can qualify.

• Adapting equipment or processes to meet new regulatory requirements e.g. fire, health & safety, sound and thermal.
• Creating and deploying new mechanical and electrical systems into buildings.
• Creating, or experimenting with, new materials for use in construction or engineering projects.
• Developing new or improved equipment for use in construction.
• Developing new scientific knowledge within the geotechnical or environmental studies. 
• Developing new or improved technology into existing buildings.
• Modifying existing components and fittings into projects.

The drivers for innovation do not have to be technical in nature but if the solution being sought involves technical or scientific challenges then it is worth investigating whether this expenditure might qualify for R&D tax credits.

What types of R&D construction activities would qualify for R&D tax credits?

We have successfully claimed for projects involving:

• Building information modelling (BIM) scripting or automation development.
• Design and development of cladding systems, which incorporate novel elements.
• Design of sustainable construction methods and green building technologies.
• Development of construction solutions to reuse building structures. 
• Mathematical modelling to predict and resolve building issues.
• Research study into bat flight behaviour to inform the design of a wind farm. 
• Resolving technical issues related to the implementation of Modern Method of Construction (MMC) or off-site manufacturing techniques.

Our claims cover development activities across the construction lifecycle. However, the R&D scheme is changing a lot, and the construction sector had one of the highest levels of error and fraud when HMRC reviewed the scheme. Therefore, your business must be certain the work you’re claiming fits with the guidelines and that the claim accurately translates the eligible projects into qualifying costs.

What businesses in the construction sector often qualify for R&D tax credits?

Given the range of projects that can qualify, it is unsurprising that many businesses within the construction supply chain will be undertaking eligible projects. Companies we have prepared eligible claims for include:

• Architects and designers
• Civil and structural engineers
• Construction firms
• Product developers
• Software solution providers

These are a sample of businesses that can claim but if you feel that your business is undertaking work that may qualify, we are happy to arrange a free scoping call to help you understand the potential benefit in making an R&D tax credit claim. 

Is Building information modelling (BIM) deployment eligible for R&D tax credits?

BIM software is becoming ever-present in the construction sector, and we are often asked whether work in relation to this software is eligible. Many architects, suppliers and construction contractors have been investing in BIM software capability to allow their businesses to collaborate with other parties in the building design process. 

By creating enhancements through scripting or creating new modules, BIM software can qualify as R&D. However, deploying off the shelf BIM packages, such as Rivet from Adobe, which is as a new software package for your business, is not an eligible project. If you are unsure, please get in touch and we can assess your position.

Adding it all up – what’s the benefit?

If your construction firm is considered an SME and is profit-making, an R&D tax relief claim will decrease the amount of tax you have to pay. Whereas for a loss-making SME, a cash back payment may be available. The benefit as a proportion of qualifying spend for a profitable business is 16% whereas the cash back is available at up to 19% of qualifying costs for a loss-making business. Businesses that qualify as ‘R&D intensive’ can claim an increased benefit where the cashback is up to 27% of qualifying costs for a loss-making business.

If your construction firm is considered a large company, an R&D claim will increase the profits within the business at a rate of 20% of the qualifying spend. This credit will then translate into a reduction in tax paid or cash back at a rate of 16% of the qualifying spend. Therefore, this scheme can impact measures such as Earnings Before Interest and Taxes (EBIT) as well as providing a welcome cash injection into the business.

Other incentives available to construction companies

Businesses in the construction sector should be looking at all R&D incentives. Starting with R&D tax credits and grants for upfront architectural design and product development work, through to Research and Development Allowances (RDA) for capital spend on prototype structures, and finally to patent box for sales or licensing of protected technology, there are R&D incentives that can support your business through the construction lifecycle.

How we can help

We're here to fully support you with preparing and claiming R&D tax credits. Should you choose to get specialist R&D support from Buzzacott, we will:

• Identify what scheme your business qualifies for
• Carry out a comprehensive review of your R&D activity, working with you to ensure you are maximising your claim
• Prepare a claim that minimises potential HMRC queries. 
• Guide you through the whole claim process or on certain aspects of the claim.

We also work with you to assist in identifying other sources of R&D support and help with planning your R&D strategy, taking into account incentives and grants that might be available. By offering this holistic view of the innovation support needs, we can assist throughout the business lifecycle. Our R&D team at Buzzacott support businesses throughout the year, not just when it’s time to prepare the next R&D claim. 

We take time to listen to your business to understand the goal you’re trying to achieve with your innovation, so we can help you overcome problems and challenges along the way. By being open and honest, we aren’t afraid to challenge our clients to make sure that your claim is correct and you’ve optimised the benefit. We want to help you understand your eligible activities, without holding you up, so you know how to build a robust R&D claim. 

Download our R&D tax credit guides

• Are you maximising your R&D tax credit claims?
• How likely is your R&D claim to be queried by HMRC?

Get in touch

If you would like to speak to one of our R&D experts to find out more about how we can help, please get in touch via the form below or call +44 (0)20 7710 3330.