R&D SPEND IN THE CONSTRUCTION SECTOR
In the next part of this series, we’re looking at construction. As with some of our previous subjects, the level of eligible R&D to be found in this area is misunderstood. In fact, experts are often poles apart, with some stating that there’s no eligibility at all in construction, and others preparing claims for anything and everything!
In fact, construction definitely lands more on the ineligible end of the spectrum – most construction can be carried out without ever doing eligible R&D. However, there are a few projects within some construction that constitute qualifying work.
NON ELIGIBLE SPEND
Within construction, the first thing to include in this section are the associated trades. The chances of plumbers, electricians, roofers, plasterers and the like having any eligible R&D to claim for is vanishingly small – they’re carrying out routine tasks using well established processes and procedures.
Moving up the scale, construction companies focussed on the building of domestic housing developments are also unlikely to be much eligible R&D. The design and construction of such houses has become almost completely standardised, with similar houses being built throughout estates and over many different sites. Where eligible R&D is required in these circumstances, it’s also worth noting that any technical uncertainties will almost certainly have been resolved during the building of the first prototype house, so none of the costs of subsequent house builds would be eligible.
Construction companies that focus on the building of commercial buildings are more likely to have carried out eligible work, as by their nature these commercial buildings are more likely to have specialised requirements. However, these requirements can often me met using standard techniques without any R&D. In addition, the challenges in this area can often be around budgets, timing or logistics, and can usually be resolved without the need to make advances in an area of science or technology.
ELIGIBLE R&D SPEND
Regulatory and environmental requirements. Having said all of that, there are some interesting areas within construction that might yield eligible claims. The first is work done to comply with changing regulatory and environmental requirements. Within construction, especially of commercial buildings, developers are required to comply with a huge amount of safety and environmental regulations, which are aften updated. Where a company carried out technical R&D to develop new products, processes or services that enable compliance, this work might be eligible for tax relief.
Integrating new technologies. Often, working to make buildings more thermally efficient, for example, can involve integrating new untested technologies into a construction project. Where this is a straightforward process the company would be unable to claim R&D tax relief. However, companies working with cutting edge technologies that require them to make advances in, for example, engineering or materials science to be able to successfully install the technologies or achieve the required outcome, would be able to make a claim.
Modular Construction. Construction companies working in non-traditional areas of construction, such as modular design and building, are more likely to be carrying out eligible work. For example, the development of modular building materials, products and processes is likely to involve advances in electrical engineering and civil engineering, and could be eligible for R&D tax relief.
Supply chain. As with a lot of the less eligible sectors we’ve discussed, the supply chain to the construction industry is far more likely to yield eligible claims than the industry itself. For example, developers of advanced thermal cladding likely to be making advances in materials science, and software companies developing advanced Building Information Management could be advancing software science.
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