The value of tax breaks claimed by UK companies investing in research and development has tripled in the last 10 years, according to the latest figures from HM Revenues & Customs, but Baker Tilly has warned that many construction companies may be missing out.
The latest figures, released 15 August, show that for the financial year ending 2012 there were only 210 claims for R&D tax relief by companies in the construction sector, with claims totalling around £15 million – just a fraction of the total £1.2 billion claimed by UK companies.
R&D tax credits, first introduced in 2000, are a tax relief designed to encourage greater R&D spending and innovation. Since then, the available tax breaks have become more generous and HMRC has expanded the way it interprets and applies the rules in order to provide greater stimulus for innovation in the economy.
Any eligible company can deduct up to 225% of qualifying expenditure when calculating their profit for tax purposes. Qualifying expenditure may include, for example, investment in the development of new materials and tools, or in process improvements or new software. Costs associated with the design of heating systems or energy-saving equipment, or expenditure relating to mechanical engineering or architectural design, may also qualify.
“It’s surprising that there have been so few claims for R&D tax credits in the construction sector,” said Howard Freedman (pictured), Baker Tilly’s head of real estate and construction. “This may simply be because firms don’t realise they qualify for this type of relief. Claims can even be backdated for up to two years, so for construction firms facing cashflow difficulties in these straightened times, this relief can be a lifeline.”