Construction firms miss out on millions in unclaimed R&D tax credits

Construction companies are missing out on millions of pounds a year in research and development (R&D) tax credits by failing to claim for their full entitlements, according to leading tax advisers.

The sector claimed just £20m in R&D tax credits during 2013/14, according to HMRC figures.

But accountancy firm Moore Stephens said that many construction firms are unaware that their existing activities are well within the scope of the tax relief available.

Partner Paul Fenner said: “R&D tax credits can cover a far wider variety of activities than many companies think. Research and development is not just something that’s done by men in white coats in a lab – it can happen onsite and frequently does.”

Garry Hague, director at R and D Tax Specialists, added: “Companies that are developing new, or improving existing, products or processes, and are tackling ‘technological uncertainty’ on their own behalf, or for their clients, are likely to qualify.”

Examples of where construction companies may be missing out on R&D tax credits include:

• Applying value engineering to outperform traditional construction techniques, in areas such as robustness, sustainability, durability, fire resistance, thermal performance and sound insulation.
• Use of affordable or renewable materials to reduce carbon emissions and improve energy efficiencies.
• Converting buildings to a new use, such as office to residential.

SMEs can claim tax relief for between 26% and 33% of the costs of R&D against corporation tax bills. Large companies with more than 500 employees can claim 10%.

“Companies that claim can benefit from, on average, a £50,000 reduction in their corporation tax with a cash credit. However many claims are much larger. The scheme is retrospective, allowing claims to be made for development work undertaken over the prior two years,” Hague said.

“Construction is a demanding business and companies should be taking every incentive that government offers to improve cash flow and improve competitiveness in the market. The R&D Tax Credit scheme is the government’s biggest single funding scheme in support of R&D in the business sector, and more companies in construction need to be claiming.”