Is UK construction missing out on Research & Development tax credits?

Consider the following three facts:

• The UK’s Manufacturing sector contributes £190 billion to the UK economy each year, and gains 30% of all UK Government R&D Tax Credits.
• The UK Information Technology sector contributes £180 billion to the UK economy each year, and gains 24% of all UK Government R&D Tax Credits.
• The UK’s Construction sector contributes £117 billion to the UK economy each year, but secures less than 3% of all UK Government R&D Tax Credits.

UK construction appears to be significantly under-represented in its participation in UK Government provided R&D tax credits. We all know that most UK contractors do not tend to have a large “pure” R&D spend in the sense of funding a single Research and Development department, but that is not the criteria for securing UK Government tax credits. UK construction is a world leader in construction related innovation whether it be in developing new techniques, designs and materials – including to meet evolving safety and environmental standards. All these activities potentially attract R&D tax credits, whether labelled “R&D” internally or not. In many ways every major project is a R&D opportunity for the next major project.

So why do UK construction sector businesses claim less? BDO believe this is more to do with the way that businesses in the construction sector manage R&D claims – and chiefly the fact that the process is not given sufficient attention. This is perhaps understandable when your business is focusing on delivering excellent infrastructure on time and on budget, but it does mean that there may well be scope for construction and infrastructure businesses to improve their bottom line in this area.

If construction is going to help the UK Government “Build Back Better”, don’t miss out on tax credits the UK Government funds to support positive change. I am therefore pleased to share a more detailed note on this topic below from BDO.