Construction is referred as the UK’s 2nd largest sector. But, when seen the order of claiming R&D tax credits, this industry ranks 2nd from lowest in the group. Now the question is “What is that which is making construction industry to miss out on this tax credit plan”.  One of the reason can be a lack of innovation. This article will tell you about all those reasons in detail.

What are basically R&D tax credits?

R&D tax credits are designed as a “tax incentive” to encourage innovation in the entire UK industry. This incentive is more and more pushed to increase investment of firms in R&D and to support UK enterprise on their way to Brexit. In reality, 80% of construction companies are not taking benefit of R&D tax relief.

The reason why they are failing to claim R&D tax credits is because a few of them are unaware of this scheme, and others are put off by its time-consuming application procedure. Some also think that R and D sector is the reserve of ‘lab coats’ in scientific and technical fields.

Negligible or very less research and development task

To qualify for research and development tax credits, an organization or an industry has to fulfill certain conditions laid out by them. One of the prime conditions being that the industry must have spent its finances on conducting innovative tasks. In case of construction industry, companies operating in this field do not perform any R&D (research and development) work.

These firms account for 3% or less than this percentage of the total R&D tax credits, that is awarded to businesses in UK every year. A vast majority of construction experts and professionals confirm that R&D is not a significant segment of the construction industry. These firms are simply not investing in carrying out innovative works. Due to which they fail to qualify for R&D tax credit and reap the benefits of it.

Self-perception and culture

Though there is a lot of innovation and research carried out in this sector, but the culture of the industry is holding firms back from claiming. Construction firms are dealing with regions of technological uncertainty, that is the major requirement for R and D tax credits. This uncertainty prevents construction companies from recognizing innovation that is happening within their business.

Communicating complex opinions

Many construction companies find it difficult to effectively communicate projects to HMRC. Though the technical knowledge is enhancing in R&D unit of HMRC, it is still critical for businesses to communicate about the type of technological difficulties that they have encountered, and the measures they have adopted to overcome them.

Resistance from senior personnel

Combined with cynicism and a lack of awareness throughout the claim filing process, advisors can come across substantial resistance from business owners at the beginning of the R&D procedure.

Conclusion

Due to all the above reasons, construction industry in the UK is not able to capitalize on R&D tax credits. Overcoming such resistance is to ask the right questions. Once construction firms see that research and development is taking place in their business, and can result in tax relief, then that resistance will rapidly transform into enthusiasm.

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