Some Of My Clients Are In Construction - What Activities Can Attract R&D Tax Credits?
Being in the construction industry is often about working in all weathers, plenty of design work and endless problems to be solved. But what many businesses don’t realise is that construction involves a hefty amount of innovation too, potentially making them eligible for R&D Tax Credits.
This highly prized, very generous tax incentive is something your clients really don’t want to be missing out on. Even so, the sad fact is that that as few as 3% of claims for R&D Tax Credits come out of the building trade every year. A common reason for this is that jobs are seen as just part of daily business life, when actually they could make up the basis for a substantial R&D tax relief claim.
Another common problem is that construction business owners often fall for the stereotype that R&D only occurs in techie companies or laboratories. In reality this couldn’t be further from the truth, and with coronavirus COVID-19 economic uncertainty, a looming Brexit fallout and potential skills shortages, construction needs all the help it can get.
With average SME claims worth around £54,000, R&D Tax Credits are the one of the biggest permanent government-backed tax incentives of its kind. So don’t risk letting your clients slip through the net.
Does your client’s construction company carry out R&D that would be eligible?
At Myriad Associates we strongly recommend that all companies carry out a regular review of their latest projects and activities to check if they have a claim. Don’t forget too that even if your client isn’t a building company themselves, they may well be a supplier or supporter - and all UK companies are eligible. For example, your client may manufacture concrete, tanking or damp-proof coursing. Perhaps they design special cladding or rendering systems, or produce clay tiles, sheet metal, beams, paint, fixings, glue and much more.
Here are a few other examples of activities in the construction sector that may also qualify for R&D Tax Credits. It’s not an exhaustive list by any means, but it gives some idea of the common ones:
- Land remediation work. This could involve the development of more effective techniques to remove contaminants from land such as waste chemicals
- Developing alternative building or production techniques to reduce the impact of building work on the environmental
- Increasing the lifespan and durability of materials that protect the exterior of a building
- Making products more stable, so that they don’t bleach in the sun for example
- Developing construction techniques that mean buildings are more resistant to acts of nature like storms and earthquakes
- Improving the energy efficiency of systems within a building, like heating systems
Other areas where R&D Tax Credits may be claimed is in the construction and trialling of prototype homes that produce less carbon dioxide and are more energy efficient. This is particularly the case with ever-changing sustainability regulations.
If one or more of these conditions apply to your client’s project, they may well be entitled to the relief without evening knowing. So it’s down to you to point them out!
What kinds of specific costs can be claimed for relating to the construction industry?
There’s a wide spectrum of eligible costs that be included in a claim for R&D Tax Credits, such as:
- Staff costs, including salaries, overtime, expenses and employer’s NIC and pension contributions
- Materials used up in the R&D work itself. For example this might be steel beams used in a prototype rig
- Payments made to freelancers and subcontractors
- Certain software used specifically to make the R&D process possible
- Consumables including light, heat and power used in the R&D project
Due to COVID-19, my client furloughed a large number of their staff this year. Will this affect their R&D Tax Credits claim?
Furloughing staff doesn’t mean your client can’t claim R&D Tax Credits, but it may affect how much relief they’ll get. This is because employees on furlough will not be directly and actively engaged in R&D work.
Claims being submitted in the very short term will not generally be affected as the R&D project will likely have been carried out before the pandemic came about. However, the impact on R&D claims will likely show itself later in 2020 and into 2021 as lower R&D investment during furloughing takes effect. Government guidance is constantly being reviewed, and this is something we can help you with.
But I’m a fully qualified accountant - why would I need to work with R&D specialists?
Let's face it, accountants are expected to know everything. The problem is, R&D claims are a time-consuming and rather specialist activity. It’s a highly niche area of tax that is regularly evolving, and if HMRC detects any inaccuracies it will likely come down on your client like a ton of bricks.
At Myriad Associates we essentially take the hassle out of your clients' R&D Tax Credits claim. Over the years we have worked with accountancy firms up and down the country, who have benefitted from our broad range of R&D tax advice and services.
Our experienced teams are experts in R&D tax relief and this means you don't need to worry that we're about to pinch your clients from you or try to get involved in any other tax area. We're entirely and completely about R&D and can sort the paper work, figures and narrative document to create an application that's successful first time, every time.
We also can also carry out all of our work remotely, so there’s no need to come and see us (handy in these times of social distancing!)
Interested in finding out more?
We help you help your clients, meaning your accountancy firm can offer a more thorough, holistic service.
For an informal discussion about our services or to get the ball rolling on a claim, call us today on 0207 118 6045. If you'd prefer, you're welcome to send us a message and one of the team will get back to you. We're working as normal during this time.