Research & Development (“R&D”) in construction - latest update

Their data shows that 7,600 building firms made R&D claims in 2020 and 2021 worth £260m. Of these, only 38% were fully compliant. HMRC said that 18% of claims were non-compliant, with 44% being partially compliant.

In a recent statement, HMRC announced it was introducing several new measures to tackle non-compliant claims. These measures include requiring all claims to be made online and to be supported by an officer of the company, together with details of a tax agent associated with the claim. Other measures include, reducing the rates claimable, and if it is the first time the company is making a claim, advance notification to HMRC before doing so.

It is not all bad news however, as figures suggest that just 8% of R&D claims in 2022 came from the construction industry, with an average claim value of £46,347. This would suggest that construction firms should still make claims where they think they should do so.

What is R&D in construction?

Qualifying R&D in the construction industry includes:

  • Developing structures from new construction materials
  • Innovative usage of eco-friendly or sustainable materials or methods
  • Adapting existing construction techniques to solve environmental issues or site-specific problems
  • Innovating new methods of construction to introduce automation
  • Integrating new or improved technology into buildings
  • Modifying existing components and fittings into sites with different constraints
  • Developing new or improved equipment
  • Solving technical problems that may occur during a construction project

Any UK limited construction business can claim for R&D tax relief, with different types of R&D scheme depending on whether the company is an SME or large company. For the SME scheme, a construction company must employ less than 500 people and have a turnover of less than £85m or a balance sheet total of less than £73m. An SME’s eligible R&D costs receive an additional 86% deduction when calculating the taxable profit.

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