Construction R&D Tax Credits

Construction projects often face numerous complications that are considered routine or common, requiring non-standard technical solutions to achieve successful outcomes.

The UK government is encouraging the construction industry to be more cost-effective, efficient, and environmentally conscious, despite the complexity of construction projects, which often involve unexpected issues, delays, budget constraints, and material shortages. While we tend to focus on the aesthetic aspects or hidden technical advancements of construction, R&D actually arises from solving these challenges.

The R&D tax credit scheme aims to reward efforts made towards overcoming these obstacles by reducing a company’s corporation tax liability. Surprisingly, HMRC data shows that less than 5% of claims for R&D tax relief come from the construction industry, despite generating over £118 billion annually.

Our observations suggest that this low participation is due to a lack of knowledge about the scheme and a perception of R&D projects as routine work.

What counts as R&D for tax relief purposes?

We suggest evaluating your project against the following three criteria to determine if it meets the requirements for R&D classification in the eyes of HMRC:

• Is there technological uncertainty? If you took a competent professional in your field and gave them the documentation for your project, would the answer to your problem be readily deducible? If not, then you likely attempted to overcome some sort of scientific or technological uncertainty for your project to qualify.
• Have you achieved an advancement? The goal of any R&D project should be to take any given technology beyond what’s available in the public domain. So, if you’re doing something that’s never been done before to your knowledge, something that’s been done by other companies before in a way that was their own IP or advancing an existing technology/approach beyond what it was natively capable of, then you could have done exactly that.
• Does it demand competent professionals? A professional in the relevant field shouldn’t be able to solve uncertainties with ease. A competent professional is one who is anticipated to be familiar with the pertinent scientific and technological principles involved, aware of the current level of knowledge, and has acquired experience and is acknowledged as having a successful track record.

Industries that Have Successfully Claimed R&D Tax Credits in Construction

Given the wide variety of construction projects that may qualify, it’s not surprising that many companies within the construction supply chain are engaged in such work. Here are some examples of the types of companies whose claims we’ve assisted with:

• Construction contractors
• Groundworks contractors
• Earthworks contractors
• Fit-out contractors.
• Cladding contractors
• Civil engineers
• Structural engineers
• Building services engineers
• Designers and architects
• Steelwork fabricators
• Refurbishment specialists
• Enabling works specialists
• Temporary works specialists
• Interior designers
• Demolition contractors

This is just a sample of companies that may be eligible to make claims. If you’re uncertain whether your work qualifies, we’re happy to schedule a free assessment call to help you better understand the potential benefits of filing an R&D tax credit claim.

Eligible R&D Expenditures for a Construction Organisation Expenditures that can be accounted for in your R&D claim as revenue expenditure include:

• Payroll/staffing expenses for construction engineers, architects, designers, and project managers (gross wages, employers’ NI, and company pension contributions)
• Subcontracted R&D for the creation of novel construction equipment prototypes and cutting-edge construction software and applications, as well as external consultants for innovative ideas in construction techniques and materials.
• Consumable materials used in research, such as materials used in prototype creation or testing.
• Software and software licenses used in R&D, such as building simulation software and CAD programs.
• Compensation paid to contractors or workers for participating in performance studies or trials.
• Contributions to independent research institutions, such as universities and engineering departments, for joint research projects.
• Cloud computing and data storage costs incurred in R&D, starting from April 2023.

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