Most of the projects are classified as “specialised construction activities”, which generates around 66% of the sector’s claims significantly outpacing “construction of building” sectors at 21%. Nevertheless, R&D claims labelled as “civil engineering” are considered to be the most valuable with the biggest amount of tax relief awarded to such projects.
Introduction to R&D Tax Credits in Construction
The British construction industry is one of the largest of its kind worldwide; it plays a significant role in the country’s economic enhancement and overall development. With this sector, the UK holds the second-largest output in the EU and contributes 8.2% of the nation’s GVA (gross value added) to the economy. There are three main categories within this sector: residential, non-residential, and infrastructure. After the COVID-19 pandemic and a turbulent year, labour shortages and increasing construction costs will contribute to more competitive and more innovative structural solutions, whilst ever more stringent regulations will lead to a reduced margin for errors. Moreover, the usage of environmentally-friendly materials and technologies continues to increase.
Trends in Construction
Across the residential, non-residential, and infrastructure-based construction domains, the following trends have emerged:
Artificial intelligence
- Prevent cost overruns
- Automatically assigning risk mitigation
- Self-driving machinery
Machine learning
- Improve the quality of designs
- Create safer sites
- Increase the project life cycle
Internet of things
- Improve waste management efficiency
- Reducing project costs
- Predictive maintenance
Building Information Modelling (BIM) technology
- Improved communication and coordination
- Higher quality & more reliable results
- Cost & resource-saving
3D printing
- Quicker construction
- Improved formability to design unique and atypical designs
- New markets
UK construction companies have increased their investments in innovation, and as a result, have raised expenditures for R&D. There are different sub-categories of construction-related R&D projects, which include architecture, substructure, superstructure, building envelope, and mechanical and electrical systems.
Most of the projects are classified as “specialised construction activities”, which generates around 66% of the sector’s claims significantly outpacing “construction of building” sectors at 21%. Nevertheless, R&D claims labelled as “civil engineering” are considered to be the most valuable with the biggest amount of tax relief awarded to such projects.
What qualifies as R&D activities in the construction industry?
Some of the examples of the activities that qualify for R&D tax credits may include:
- Creating innovative structural designs for bridges and roadway systems
- Finding unique approaches to bypass restrictions in accordance with a site’s location
- Construction equipment upgrade and development
- Green energy infrastructure design
- Projects related to designing or building new sustainable solutions
- Developing equipment for water flows analysis
- Innovative structural design projects
Real example
One of our clients was provided with incorrect loading capacities for a bridge that had corroded over the years; with no accurate point of reference or documentation, their team could not readily deduce the bridge’s strength for future use. The creation of a scaffold system was required, which would not rely on the support capacity of the bridge’s heavily corroded centre-span and its primary steelwork. Our client enhanced a number of existing clamping systems and components so they could be more suited to clamp onto weak and corroded structures.
The team’s R&D work lies in their design and development of a scaffold structure that would mitigate any disproportionate horizontal and vertical forces when angular ranges outside of 30-60° are unavoidable. Design plans with steel elements are initially designed to be within this range to avoid the disproportionate forces, so their solution could not be readily deduced (a key criterion for qualifying R&D projects).
What doesn’t qualify as R&D
R&D can occur during the process of designing and building sustainable solutions. However, it may not qualify if the procedure is readily deducible and widely available across the net. Activities involving routine sales and marketing work would also not qualify for tax credits.
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