Research & Development Tax Relief is still disregarded by many construction companies as irrelevant when, in actual fact, it could provide a valuable cashflow boost writes Laura Duggan, Head of R&D Tax Relief at Cowgill Holloway Property & Construction.
To say R&D Tax Credits ‘aren’t just for men in lab coats’ has become something of a cliché but, nevertheless, it’s a perfectly apt phrase for the construction industry. In fact only 1% of R&D Tax Credit claims in the year ending 2012 originated from the sector – a figure that illustrates a stark lack of awareness rather than a question of eligibility.
Who can claim?
It is important to bear in mind that research and development is classed as an advance in a specific field, achieved through the resolution of a technical uncertainty.
Over the last few years, Cowgill Holloway Property & Construction have worked with several construction companies who initially assumed their day to day activities wouldn’t touch on R&D when, in fact, nothing could be further from the truth.
Indeed, qualifying expenditure can be just as easily generated from everyday onsite problem solving as through a planned project to increase efficiency.
Have a quick look at the below; if you’ve engaged in any of these activities (or something similar) over the last 3 years, you could be eligible for a significant sum in tax credits:
- Advancements in structural techniques to aid construction on unusual ground conditions
- Innovative use of green or sustainable technology and methods
- Development or adaptation of tools to improve efficiency
- The use of new or unique materials, e.g. recycled products
- Improvement on existing construction methods or development of new ideas to solve ongoing issues related to the site environment or project specifications
- Investigation related to the removal of contamination from sites, including land remediation
- Innovative architectural design
- Development of bespoke software
Case Study
The Cowgills tax team were engaged by Urban Regen, a well-established brownfield remediation company, to investigate a potential claim for R&D tax relief. After an in-depth study of sixty five projects, two were identified as potentially qualifying.
Activity on the first site arose from concerns that processes governing the flow of volatile substances led from groundwater through soils and ventilated building foundations into the living space. Further issues resulted from the migration of liquid and dissolved solvents through the aquifer to a nearby watercourse. Qualifying R&D activity was undertaken via treatment trials to solve the issue, from initial research to benchmark testing and implementation.
The second project involved the presence of 500 chemical compounds onsite. Many could only be tentatively identified and, as a result, considerable research was required to assess toxicology, environmental behaviour and fate by analogy with the closest known substances. Environmental and human impacts had to be considered as building work for houses could not begin until the land had been fully investigated and remediated to regulatory approval.
The tax team submitted a claim related to staff costs (both directly and indirectly involved in the relevant projects), subcontractor/externally provided worker costs and also overheads. Following a meeting with HMRC inspectors, the claim was validated resulting in a landmark repayment to Urban Regen of c£100k corporation tax.
The Process
To date, Cowgill Holloway Property & Construction’s R&D tax experts have claimed over £5m for construction clients (including loss making SMEs) working on a no-win no-fee basis. As a result investigating the possibility of a claim is a low risk, high reward exercise. On average the relief reduces development costs by 25% on a qualifying project and claims can be made retrospectively over the last 3 years.
Our sector knowledge will ensure that you receive maximum entitlement plus we provide proactive advice to identify R&D expenditure at an early stage as you undertake future projects.
We are urging construction companies to change the prevailing attitude that such refunds are ‘too good to be true’ and ‘only applicable to other industries’ and strongly suggest investigating this generous tax relief as soon as possible.
