Construction research and development tax credit claims up 47%

Claims by construction firms for research and development (R&D) tax credits rose 47% in 2015-16, according to new statistics from HMRC.

The total value of R&D expenditure against which claims were made was £390m during the year, CM’s sister website BIMplus reports.

The latest data shows that construction companies submitted 705 claims for research and development tax credits in 2015-16, up from 480 in 2014-15.

First introduced in 2000, these 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 its allowable R&D expenditure.

Since launch, more than 170,000 claims have been made nationally, with almost £16.5bn claimed.

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 up to an additional £24.70 (applying 19% UK corporation tax rate for FY17).

Kelly Boorman, head of construction at tax consultant RSM, said: “The increase in the number of claims and the level of support given to construction companies undertaking eligible R&D is impressive.

“This reflects a continuing growth in the awareness of these important tax reliefs as well as the positive impact of two changes made by the government to improve the credits available for SMEs and large companies in 2015-2016.

“Claims have continued to increase in every area of the UK and the number of first-time applicants has again increased dramatically, which is good to see. Gaining efficiency through innovation is key for the construction industry, which highlights that this increase in the number of claims and the value of claims looks set to continue.

“Construction companies who have not yet considered R&D tax credits should review their position now, as they may not be taking advantage of the tax reliefs that they are entitled to and this is potentially putting them at a competitive disadvantage.”