R&D Tax Relief Explained for Businesses in the Built Environment
Published 5 November 2020
How can businesses in the built environment sector benefit from HMRC’s R&D tax relief scheme?
Recoup’s Directors, Joe and Luke Averill, answered this question during a recent webinar held by Built Environment Networking.
In this article, we cover the key points of the webinar regarding research and development in construction, highlighting:
- What is R&D tax relief
- Why it’s misunderstood
- Are you eligible for R&D tax relief?
- How much time does an R&D claim take?
- When will you see the funds?
- Why use Recoup Capital?
Keep reading to find out how your property, construction or architecture business can benefit from R&D tax relief.
What is R&D tax relief?
R&D tax relief is a government scheme administered by HMRC that gives UK companies the ability to claim tax relief on their research and development activities.
It was first launched in 2000. Originally, it was for heavily science-based companies. But in 2016 the legislation changed, opening the scheme up to more companies in the UK (limited and PLC companies).
Roll forward to 2020 and prime minister Boris Johnson upped the R&D investment from seven billion to twenty-two billion per year. The government wants to reward businesses that are actively overcoming technical challenges and developing innovative products to forward their business, and this is where research and development in construction comes into play.
A misunderstood area of tax relief
HMRC has reported that only 5% of eligible firms claim under the relevant legislation.
This is shocking when you know that the typical SME can reclaim up to 33% of qualifying expenditure in the form of corporation tax credit (for large companies, it is 13% of your qualifying R&D expenditure under Research and Development Expenditure Credit). If a company has paid off its corporate tax, relief can come in the form of a cash payment.
Now more than ever, it’s vital companies understand that this opportunity is available to get cash back into their businesses, helping them survive these difficult times.
You are probably eligible!
Is my business eligible for R&D tax relief? The answer is usually yes, especially if you’re a limited or PLC company in the property or construction industry.
Just take a look at the qualifying R&D points we look for in this sector:
- Groundwork and foundation issues (e.g. flooding and asbestos issues)
- Environmental issues
- Parking and transport issues
- Enhancing energy efficiency of buildings (e.g. you’re building with carbon neutral in mind)
- Planning conditions imposed by local authorities (e.g. tackling the challenges involved with regulation changes)
- Use of modular build techniques (e.g. you’re improving the efficiency of buildings of delivering sites faster)
- Finding innovative ways to maximise the number of units per site
- Any issues with services on site
- Any listed building issues.
This isn’t an exhaustive list, but it highlights the many ways you may be using research and development in construction initiatives to qualify for tax relief.
Our reclaim process takes two hours of your time
You’re a busy business owner, and your main concern is how much time and effort the R&D tax relief process will take.
Take a DIY approach and yes, it’s probably going to be difficult and time-consuming.
Get help from a specialist like Recoup and it takes just two hours of your time.
Gathering financial information such as:
- Full accounts for the last two years (you can backdate the R&D claim two financial years)
- List of your payroll
- List of your CIS contractors
- Anti-money laundering (AML) information for one director
- Tax computations.
* All this information should be easily accessed through your accountant.
A call with Recoup’s chartered tax advisor. You’ll run through the challenges your business faced in three or four of your projects in the last two financial years.
- This is to draw out the technical challenges faced around the products and processes you implemented to make aspects of your projects more efficient.
- We’ll spend time ensuring you’re fully prepared for the call
How long will it take to see funds from your claim?
On average, it can take between six to eight weeks.
But since the government is trying to get as much money back into businesses as possible due to the pandemic, we’ve seen payments being made between two and four weeks.
When it comes to eligible costs, Recoup’s chartered tax advisors look at:
- 100% of the costs of staff salaries, employer’s NIC, pension contributions and reimbursed expenses
- 65% of the costs of hiring subcontractors and freelancers
- Materials and consumables including utility bills that are used up or transformed by the R&D process
- Certain types of software (e.g. if you’re implementing a bespoke system to streamline your product of process to drive efficiency)
- Payments to the subjects of trials or failed projects (e.g. if you’re an architect firm tendering five to ten jobs a month and only win one contract, but you’ve done the R&D on producing the assets, the work undertaken is usually eligible).
As we mentioned before, a typical R&D company can reclaim up to 33% of qualifying expenditure.
Here at Recoup Capital, we only use chartered tax advisers with 1000 plus successful claims. We have fifteen on our panel, all specialists in their respective industries, including the property sector. They all have over 15 years’ experience in R&D alone and know how to maximise a claim.
What are the chances HMRC will challenge the claim? It’s rare but can happen, which is why we use chartered tax advisors skilled in R&D rebates.
Out of 4,000 claims our advisors have had only six challenges that have all been robustly defended.
The national average R&D claim is £52,000. Clients working with Recoup however typically receive £108,000. Why? Because we use only experienced and skilled chartered tax advisors who have detailed knowledge of the R&D scheme, understand how businesses can develop a robust claim and possess an intricate understanding of the tax system.
Why R&D tax relief is a strategic tool
The obvious – R&D tax relief can be used to improve cash flow in the business and reduce your corporation tax bill. But its usefulness stretches even further.
For example, many of our clients use R&D as a strategic tool for the next three years (because the scheme isn’t going anywhere) when costing projects knowing that they can claim 33% of those costs back. It can transform the way you approach projects, opening you up to new opportunities for progress. Research and development in construction is a vital part of the progression of many companies.
A case study: £615,211 rebate over two years
We had a client that provided bespoke civil engineering and groundworks packages to national and small developers.
The company had a turnover of £35 million and a headcount of nineteen.
There was a wide range of qualifying points for this company that could be the same for your business: flood issues, piling issues, problems arising with building the site, etc.
We helped the business secure a £615,211 rebate over two years. Money that was used to develop their operations by offering to design and install the utility infrastructure on new build sites.
Never miss out on R&D tax relief
Gain money you never have to pay back. Money you can invest back into your business to fuel progress far into the future.
Get in touch with us today to find out how we can help you claim up to 33% of qualifying expenditure through R&D tax relief.
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