R&D Tax Credits

R&D Tax Credits

About Construction R&D Tax Credits

Research and Development tax credits are government incentive schemes designed to reward innovation. There are currently 48 jurisdictions which offer some form of this scheme including the UK, the EU, USA and Canada.

The construction sector is an innovative industry, it designs and builds unique structures, it develops new techniques, materials and processes however, the sector is failing to recognise this innovation as R&D and is failing to take full advantage of the incentive scheme available to it.

In the UK the construction sector claimed just 0.48% of the industry’s GDP as R&D, compare this to the R&D intensity of the UK as a whole at 1.2%, EU28 at 1.96%, China at 2.13%, OECD at 2.4%, USA at 2.8% and Korea at 4.6%.

The UK government is striving to increase the UK’s R&D intensity and is using the R&D Tax Credit scheme as a major incentivising tool to achieve this.  The aspirational target for the UK is the match the R&D intensity of the OECD.

In this environment of tight margins firms should be taking every advantage to aid profitability and cash-flow. The UK’s scheme offers profit making firms a tax credit of up 26% of qualifying expenditure, if the firm is loss making this increases to 33% and becomes a cash payment and companies can potentially backdate claims for the last two accounting periods.

The below tables highlight the additional turnover that would be required to generate profits equivalent to the potential tax credit for a profit-making firm.

Current construction industry average qualifying R&D expenditure claim %
Turnover:                                                            £10m
Qualifying expenditure @ 0.48%:                   £48,000
Tax credit received:                                          £9,120
To generate this net profit the company would need to turnover an additional: £364,800

Current UK industry average qualifying R&D expenditure claim %
Turnover:                                                            £10m
Qualifying expenditure @ 1.2%:                     £120,000
Tax credit received:                                          £22,800
To generate this net profit the company would need to turnover an additional: £912,000

UK aspiration for qualifying R&D expenditure claim %
Turnover:                                                            £10m
Qualifying expenditure @ 2.4%:                     £240,000
Tax credit received:                                          £45,600
To generate this net profit the company would need to turnover an additional: £1.82m

Chances are you are already doing work which qualifies as R&D, surely it would be better to maximise your profitability and cash-flow with your existing contracts before winning additional projects.

Urban Project Services works in partnership with senior management, project teams and accountants, to undertake the time consuming research and complexities required to identify, assess and document qualifying Research and Development needed to make a claim under the scheme.

Let Urban Project Services audit your projects to identify R&D expenditure to increase profits and working capital.

Expert. Innovative. Professional. Reliable.