finance 23


Rise in construction businesses applying for research and development tax relief


Has research & development tax relief led to companies within the construction industry refocusing their objectives? Kerry McKeown, tax director at Grant Thornton considers the recent reforms to the research & development tax relief and the increased uptake by companies in the construction sector


Initially, the


payment of a tax credit was restricted to loss-making SMEs but from April 1, 2013, new rules will allow loss-making large companies to also claim an above- the-line credit


... the increased attractiveness of tax reliefs available to companies investing in innovative projects will have ... encouraged companies to consider new methods of construction


Despite initially only making a small number of claims for research & development (R&D) tax relief, the construction sector now appears to be making renewed commitments to innovative projects as more companies within the sector seek to take advantage of the R&D tax relief.


What is R&D?


According to the Department of Business Innovation & Skills, R&D takes place for tax purposes when a project seeks to achieve an advance in science or technology, through the resolution of an aspect of scientific or technological uncertainty. Such advances typically include the improvement to an existing product, process or service.


Qualifying expenditure includes certain staff costs, computer software, consumable or transformable materials, externally-provided workers and payments to clinical trial volunteers.


What are the tax benefits of R&D?


Since its introduction in 2000, the relief has provided companies with a valuable means of reducing their taxable profit and, in certain cases, providing a tax credit. Recent reforms have enhanced the attractiveness of the relief, with small and medium-sized enterprises (SMEs) now able to claim relief for 225% of qualifying expenditure, and large companies able to claim 130%.


Initially, the payment of a tax credit was restricted to loss- making SMEs but from April 1, 2013, new rules will allow loss- making large companies to also claim an above-the-line credit.


THE BUSINESS MAGAZINE – SOLENT & SOUTH CENTRAL – MARCH 2013


Why has there been an increase in the number of R&D tax relief claims made by companies in the construction sector?


While the construction industry is typically viewed as a traditional sector within the economy, many companies have started to move towards more modern methods of construction through improvements in products, processes and technologies. Such moves have been made, in part, with a view to remaining competitive in a difficult market. However the increased attractiveness of tax reliefs available to companies investing in innovative projects will have also encouraged companies to consider new methods of construction.


In addition to the benefits of the R&D tax relief, the new Patent Box regime coming into effect on April 1, 2013, provides a further incentive for companies to invest in the innovation of new technologies, products and processes. The Patent Box regime will give companies access to an eventual effective corporation tax rate of 10% phased in over four years to 2017/18. This will apply to profits derived from patents, including the sale of products incorporating a patented component and some services.


Recent experience


Our R&D specialists at Grant Thornton have worked with many clients in the construction sector to produce successful claims for R&D tax relief. These claims have covered extensive and varied projects, including the following:


• The use of insulating materials in double glazing units to improve thermal capabilities


www.businessmag.co.uk


Kerry McKeown


• Development of prefabricated building techniques and components


• Development of glue-laminated timber technology


• Development of self-leveling ground beams


• Development of rapid connection and assembly methods


• Introduction of magnetic sensors in equipment


• Overcoming considerations and design issues in the construction of a bridge


• Development of a suitable design (and materials) for an offshore wind turbine base.


If you think your company might qualify for R&D tax relief, Grant Thornton can assist you in finding out more about the available benefits.


Details: Kerry McKeown 023-8038-1160 www.grant-thornton.co.uk


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