R&D tax credits claimed by construction companies up 75%
The value of research and development (R&D) tax credits claimed by construction companies has increased by 75% from £20m to £35m in the last year, said Moore Stephens, the Top Ten accounting firm.
Despite this increase, Moore Stephens says that the construction sector is still missing out on billions of pounds in tax relief every year.
Moore Stephens says that the majority of construction businesses are not aware that many of their existing activities qualify them for R&D relief. Construction companies can claim R&D tax credits for implementing new techniques and systems, and if they improve their processes or upskill their workers.
Moore Stephens estimates that businesses in the construction sector can claim R&D tax credits worth around 2% of their turnover when they are aware of the full range of qualifying activity.
The turnover of the UK construction industry is approximately £205bn, which means that the sector should be looking to claim relief worth around £4.1bn.
SMEs are entitled to claim tax relief of between 26% and 33% of the qualifying costs of research and development against their corporation tax bills, while large businesses with over 500 employees can claim 10% of qualifying spend.
There is currently no upper limit on the absolute amount of qualifying costs on which R&D tax relief can be claimed.
Moore Stephens said that while it is good news that more businesses are benefitting from R&D tax credits, the sector needs to be made more aware of the total benefits the construction sector could draw from R&D tax credits.
Paul Fenner, partner at Moore Stephens, said:
“The construction sector still isn’t making enough use of R&D tax credits.
“There’s still an inaccurate view R&D is only done by scientists in a laboratory, when in fact it can – and does – happen on site.
“In order to qualify, all a business needs to do is implement new techniques or systems. If this improved their processes or their workforce, they can count it as R&D.
“The earlier in the project that a business can calculate which tax credits they’re entitled to the better. This could radically change the project’s economics by allowing them to build any savings into the project’s plans.
“In an industry where margins are tight, knowing that you can claim back a proportion of your costs could make the profit margins more attractive and even make the difference between it being viable or not.”