Could your construction clients benefit from R&D tax credits?

AUTHOR: Ian Hawkins

Construction firms are coming under pressure from all sides just now: with the rising cost of raw materials, margins are being squeezed. Finance is more expensive and harder to come by, and the final clients buying properties may be struggling to get a mortgage deal.

In this environment, construction firms need all the help they can get. R&D tax credits could be part of the answer.

An R&D tax credit is a cash payment from the government to encourage businesses to undertake research and development (R&D). There are two types of credit: small and medium sized enterprises (SME) R&D Tax Relief and Research and Development Expenditure Credit (RDEC).

The credit is worth getting: for example, a qualifying SME (criteria includes having fewer than 500 employees and a maximum revenue) can claim up to 33p for every £1 spent on R&D.

What qualifies as R&D?

The one thing that holds back businesses of all kinds from claiming the R&D tax credit is that they don’t realise they qualify for it. This is particularly true of the construction industry which accounts for just three percent of all R&D tax relief claims submitted. HMRC statistics show that the uptake of tax credits is uneven across UK industries, and there is clear potential for you to help your clients in the construction industry to take advantage of the scheme.

Before asking whether your client should be doing something different to qualify as R&D activity, there are a number of activities that construction firms may already be undertaking that could see them reach the criteria, such as:

• Development or adaption of tools and materials to improve efficiency
• Adapting construction techniques to suit certain environmental or land conditions
• Identification of technological improvements to the construction products and software used (can include developing, testing and implementing systems that are technically difficult)
• Research and design
• Development of environmentally friendly methods or sustainable technology
• Development of sophisticated systems to meet health and safety systems
• Using materials in a new way
• Development of unique products
• Developing an innovative modular construction method
• A new system for superior energy efficiency

With building regulations frequently changing, architects creating challenging and innovative designs with new materials and a push for greater sustainability in buildings, there are clear opportunities for R&D to be undertaken by construction firms.

Accessing funds quickly
Your client needs the money and you have identified the opportunity for them to claim R&D tax credits. But the wheels of the tax system can move slowly – what if the need for funding is urgent?

There are lenders willing to advance a percentage of the value of the R&D tax credits, giving your client access to funds in as little as a week of your first conversation with the lender.

Swoop can connect you quickly with a lender who will be able to help you find a solution for your client here: Advisor Portal.

Adding value as an advisor
R&D tax credits are a clear way of adding value and becoming indispensable to your clients. Picture the scenario:

• Rising costs have created a cashflow problem for your construction client
• They ask you about a short term loan to make up the shortfall
• You ask the right questions and discover they are eligible for R&D tax credits
• You get an advance on these credits to cover their short term need
• The client’s immediate problem is solved – without going into debt
• They have an ongoing vehicle for saving money through the tax system

If you would like to learn more about R&D tax credit and how Swoop can help you access these funds faster for your clients, log into the Advisor Portal and arrange an appointment with our team.