Enhanced tax reliefs are available to companies, including those in the property and construction sector. These include relief for Research and Development (“R&D”) activities and Land Remediation.
Companies across many industries do not consider themselves to be undertaking R&D, which is often considered to be ‘lab coat’ scientific research.
In fact, R&D is not limited to this. Our clients are constantly surprised at what qualifies under the rules and the opportunity to claim should not be overlooked - especially in the property and construction sector, where companies may often have several qualifying projects.
For SMEs expenditure qualifying for either relief attracts an enhanced tax deduction; for loss-making companies, losses can be surrendered for a cash repayment. For large companies relief for qualifying R&D expenditure is through a credit against their tax charge (RDEC).
The net (cash) benefit of an R&D claim is from around 10% to 33.3% of the qualifying cost, depending on the size of the company and whether they make profits or losses.
Examples of qualifying activities may include:
- Creating new, improving or adapting existing construction methods, materials and design for projects, e.g. for extreme temperatures and environmental conditions, combining known material types to achieve an unique composite product, having to achieve above normal tolerances, a requirement to complete projects with out of sequence working methods due to accessibility or site specific requirements.
- Automation in construction which greatly speeds up construction times and lowers costs.
- Breakthroughs and achievements made in the use of the latest building technologies; e.g. post-tensioning, innovative formwork designs or temporary works, and modular construction.
- Development of an advanced remediation solution for a site by creating a unique mix of additives and mixing these with the soil to improve its mechanical properties.
- Development of a complex cantilever scaffold and temporary works design to overcome challenging conditions.
For Land Remediation, the benefit of a claim is between around 10% and 20% of the qualifying expenditure, depending on whether the company is making profits or losses.
The relief is available for companies that acquire contaminated or derelict land for the purposes of a UK property business or trade, and who clean the land. Relevant contamination includes asbestos, as well as some naturally occurring contaminants, such as Japanese knotweed, radon and arsenic.
What are we doing with our clients?
We are able to liaise directly with project managers as well as finance staff to identify, validate and maximise claims for enhanced relief.
In our experience, an R&D claim is much more likely to be successful when supported by a report clearly evidencing the claim’s validity. We work with our clients to produce reports which address the key criteria for relief, resulting in a high success rate and an excellent working relationship with HM Revenue & Customs, with whom we negotiate on behalf of our clients.
By necessity, this briefing can only provide a short overview and it is essential to seek professional advice before applying the contents of this article. This briefing does not constitute advice nor a recommendation relating to the acquisition or disposal of investments. No responsibility can be taken for any loss arising from action taken or refrained from on the basis of this publication. Details correct at time of writing.
This article was previously published on Smith & Williamson prior to the launch of Evelyn Partners.