Marketing No Comments

UK construction companies are increasing their investment in innovation

UK construction companies are increasing their investment in innovation, with research and development (R&D) expenditure rising by £70 million, according to new figures released by HMRC.

Analysis by IronmongeryDirect revealed that in the first part of 2018/19, construction firms spent £1.36 billion on qualifying projects. Even though many claims have yet to be submitted for that financial year, this is already 5.4% more than the whole of 2017/18 (£1.29 billion).

Using the government’s R&D Tax Credit Scheme, companies can claim back up to 33p for every pound spent on R&D activity. This includes any project that aims to advance the industry by researching or developing a new process, product or service, or improving an existing one.

For such work completed during 2018/19, construction companies have already claimed £235 million of Corporation Tax relief.

Discover our R&D Tax Reclaim services.

More companies in the sector are starting to take advantage of the scheme, as the latest data shows overall number of claims is also on the rise. So far, construction businesses have made 3,340 claims for R&D funding, which is a year-on-year increase of 1.8% (60). The industry now represents 5.7% of all R&D claims in the UK.

The majority of the construction-related R&D projects are classed as ‘specialised construction activities’. These account for two-thirds (66%) of the sector’s claims, way ahead of ‘construction of buildings’ in second place (21%).

However, the most valuable construction R&D claims are those labelled as ‘civil engineering’. Across the whole industry, the average R&D claim in 2018/19 was worth £70,359 – almost 5% higher (£3,286) than the year before (£67,073) – but the figure is far greater for civil engineering projects. The typical amount of tax relief awarded to such work is £129,412.

The totals also vary significantly across the UK. The most innovative area is London, with more claims made in the capital than any other part of the nation (455).

But it is Northern Ireland where construction represents the greatest percentage of a region’s total R&D claims. More than one in ten (11%) of the country’s qualifying projects fall within the industry (180/1,605).

Learn all about how our R&D Tax Claims work.

Despite only making the fourth highest number of claims, construction firms in the North-West of England are investing the most money in innovation. Its businesses have already registered £145 million of R&D spend for 2018/19 – more than any other area.

The regions which have made the most and least claims for construction R&D funding for 2018/19, so far, are:

  1. London – 455 claims (£55m)  
  2. South East – 425 (£85m)  
  3. East of England – 400 (£5m)  
  4. North West – 375 (£145m)  
  5. West Midlands – 295 (£10m)  
  6. Yorkshire and the Humber – 255 (£85m)  
  7. South West – 250 (£10m)  
  8. East Midlands – 215 (£10m)  
  9. Northern Ireland – 180 (<£5m)  
  10. North East – 165 (£40m)  
  11. Scotland – 165 (£10m)  
  12. Wales – 155 (<£5m)  

Dominick Sandford, Director and Head of Merchandising & Marketing at IronmongeryDirect, said: “It’s encouraging to see that so many UK construction companies are taking advantage of the R&D Tax Credit scheme. Our businesses are world-leaders for innovation and the HMRC initiative is designed to reward them for their pioneering work.  

“The tax relief can provide a welcome boost for construction firms and any money saved can even be reinvested to finance further research.”  

By Jonathan Symcox

Source: Business Cloud

To find out more about how we can assist you with your R&D Tax Reclaims please click here

Marketing No Comments

App backed by Innovate UK to begin Wakefield trial

Wakefield-based Not Usual Ltd, the company behind engagement app Bleisure Rewards, has announced its new ‘Eat Out Round About’ app will launch with a trial in its home city backed by Innovate UK.

Backed by the government’s Innovate UK fund, the ‘Eat Out Round About’ scheme has been designed to support hospitality by providing customers with vouchers for meal discounts.

Ahead of a national roll out, the app will launch with a Wakefield trial from 22nd March and will focus on takeaway food only in line with restrictions.

It said the scheme could inject up to £30,000 into hospitality businesses in the city.

Local businesses purchase Eat Out Round About vouchers for their employees and customers who can use the app at local restaurants.

Discover our R&D Tax Reclaim services.

Once given a code, customers can download the free app and redeem their voucher for up to £10 off at a participating restaurant.

Rolled out across three periods, each launching as hospitality reopens, the trial is backed by Wakefield Council and key local organisations including Theatre Royal Wakefield and the Mid Yorkshire Chamber of Commerce.

Local businesses including The Quarry at Horbury, Marmalade on the square, Horse & Jockey, Corarima and Tet are already signed up to the scheme.

Learn all about how our R&D Tax Claims work.

Created by Wakefield based entrepreneur Ali Gordon, Eat Out Round About is the result of years of work on a previous project ‘Bleisure Rewards’ that was repurposed as the pandemic took hold in 2020.

Denise Jeffery of Wakefield Council said: “We are delighted to have been involved in the research, design and roll out of the trials when hospitality re-opens and shape the platform to help local economies to thrive.”

By Alistair Hardaker

Source: Prolific North

To find out more about how we can assist you with your R&D Tax Reclaims please click here

Marketing No Comments

Budget 2021: government consults on reform of R&D tax reliefs

The government announced a review of research and development (R&D) tax reliefs at Budget 2021 with the launch of a three-month consultation period

The government has an ambitious target to raise total investment in research and development to 2.4% of UK GDP by 2027. R&D tax reliefs have a key role in incentivising this investment by reducing the costs of innovation. It is therefore important to ensure that the reliefs remain up-to-date, competitive and well-targeted.

Combined, these reliefs provided £5.1bn of support to nearly 60,000 businesses in 2017-18, the latest Treasury figures available.

At Budget 2021 the government announced a review of the reliefs, supported by a consultation with stakeholders. This consultation will explore the nature of private-sector R&D investment in the UK, how that is supported or otherwise influenced by the R&D relief schemes, and where changes may be appropriate.

This wide ranging consultation seeks views from stakeholders on the current R&D tax relief schemes.

Discover our R&D Tax Reclaim services.

The two principal tax reliefs available to companies undertaking R&D in the UK are:

• Research and Development Expenditure Credit (RDEC): an ’above the line’ credit equal to 13% of qualifying R&D costs; and

• Research and Development tax relief for small and medium enterprises (SME scheme): an additional deduction of 130% of qualifying costs from an SME’s profits on top of the normal 100% deduction, and, if lossmaking, a tax credit worth 14.5% of the surrenderable element of that loss.

To qualify for relief, expenditure on R&D must be incurred on particular types of activity, currently limited to staffing costs (employees and agency workers), consumable or transformable materials (such as water, fuel and power of any kind), certain types of software, payments to clinical trials volunteers and, depending on the relief, some subcontracting costs.

This consultation will cover how the two R&D relief schemes support R&D in the UK, including how they operate, how they interact with the way modern R&D is done, and the main differences in design between them.

Learn all about how our R&D Tax Claims work.

It will also consider whether the schemes should be amended to remain internationally competitive and keep the UK at the cutting edge of innovation.

On a more fundamental issue it will also review whether the definition of R&D and the scope of what qualifies for relief remain fit for purpose, and whether current rates of relief, and the difference in rates between RDEC and the SME scheme, remain appropriate.

One of the key issues to consider is whether it makes sense to have two separate R&D tax relief systems and asks stakeholders for feedback on the current position and whether a merger of the two schemes would be workable.

The consultation document stated: ‘Having two schemes also means having two, overlapping sets of rules instead of a single coherent system. The 2017 Budget promised to simplify the R&D claim process, and stakeholders have suggested that “RDEC for all”, potentially with a higher rate for SMEs, could be one such simplification.’

Jenny Tragner, director at R&D tax credit consultancy ForrestBrown, said: ‘For too long, the R&D tax credit system has been faced with increasing complexity and we have long called for a proper review in place of the previous piecemeal changes which drive complexity and uncertainty.

‘The review will consider a much needed modernisation of the definition of R&D and qualifying expenditure categories, as well as seeking practical recommendations on dealing with the problem of spurious advisers. This is something which needs to be tackled urgently – and is something we’ve called for repeatedly. Administration of the incentives could also be vastly improved to provide more certainty for businesses, and we would urge HMRC and advisers to work together more effectively to improve the quality of external advice available to companies.’

As well as reviewing the rules of the reliefs this consultation is also seeking views on ways in which the claims process might be improved, both to give a better experience for claimant companies and to improve controls, reducing the risk of abuse and focussing the reliefs on genuine R&D.

The general consensus is that HMRC has been experiencing some issues with compliance due to the complexity of the rules and any improvements to the current claims process would improve the overall effectiveness of the schemes.

There are also concerns that some companies have been set up purely to advise on R&D claims, with criticisms that ‘some of these agents have developed a no-win, no-fee business model which presents a risk of boundary-pushing. HMRC is not always aware of who these agents are, or of their experience with R&D claims, and there have been instances of agents persuading companies to submit marginal claims or even to claim for activity which is not R&D,’ the consultation stated.

Last year the government consulted on a possible extension of the R&D reliefs system to include cloud software, for example, but this issue has still not been addressed and the consultation once again calls on stakeholders to provide insight into additional areas of activity which could fall within the rules.

The consultation closes for comment on 2 June 2021.

Source: Accountancy Daily

To find out more about how we can assist you with your R&D Tax Reclaims please click here

Marketing No Comments

R&D investment and tax reliefs positive for life sciences sector

A commitment to review the R&D tax relief system to ensure that tax reliefs remain competitive and well-targeted and the launch of a new fund targeting R&D intensive companies will be welcomed by the life sciences sector, a tax expert has said.

Penny Simmons of Pinsent Masons, the law firm behind Out-Law, made the comments following the UK chancellor Rishi Sunak’s budget on Wednesday.

The government will review the R&D tax reliefs system “with the objective of ensuring the UK remains a competitive location for cutting edge research, that the reliefs continue to be fit for purpose and that taxpayer money is effectively targeted”, according to Sunak.

Simmons said: “The government has set itself the target of raising total investment in R&D to 2.4% of UK GDP by 2027. Tax reliefs for R&D are widely seen as being a significant incentive to encourage such investment, so it is welcomed that the Treasury now wants to ensure that the reliefs remain effective. The UK life sciences sector invests in more R&D that any other UK sector, so any improvement or widening of tax reliefs will be positively received.”

Discover our R&D Tax Reclaim services.

“The review is wide-ranging and will consider a number of aspects, including whether the definition of what qualifies as R&D should be expanded; whether the current rates are effective and whether there should continue to be different rates available for larger and smaller businesses,” she said.

There are currently two forms of R&D tax reliefs available to companies on certain qualifying expenditure. A research and development expenditure credit (RDEC) at 13% of qualifying expenditure is available to larger companies. A separate regime for small or medium sized companies (SMEs) allows them to claim an additional deduction of 230% of qualifying R&D costs where certain conditions are met.

There is currently no requirement that to qualify for R&D tax relief expenditure must take place in the UK. The Treasury is now looking to understand when R&D tax reliefs are being claimed, how much of the claim relates to activity undertaken outside the UK and what the benefits of carrying out activity overseas might be.

Simmons said: “The government has been very clear that it wants to maintain the UK’s position as ‘a global leader in science and innovation’ and it wants to ensure that R&D tax reliefs are appropriately targeted in a way that best benefits UK industry, so it will be interesting to see whether jurisdictional limits are imposed as part of the review.”

A cap to the available R&D tax reliefs for SMEs to prevent perceived abuse of the system was also confirmed in the budget. The amount of R&D tax relief that can be claimed per year will be capped at £20,000 plus three times the company’s total PAYE and national insurance contributions’ liability and will apply for accounting periods beginning on or after 1 April 2021.

Learn all about how our R&D Tax Claims work.

The chancellor also confirmed the creation of a new funding programme called ‘Future Fund: Breakthrough’, through which the government will provide £375 million “to support the scale up of the most innovative, R&D intensive businesses”. The scheme will be overseen by the British Business Bank which “will take equity in funding rounds of over £20 million led by private investors to ensure these companies can access the capital they need to grow and bring prosperity to communities across the UK”, the Treasury said.

A review into the Enterprise Management and Incentive (EMI) scheme, a tax-advantaged employee share scheme was also announced by the chancellor. The review will consider the effectiveness of the scheme in supporting SMEs “to recruit and retain the key talent they may need to grow and scale up”.

Simmons said: “The life sciences sector will be relieved that the budget did not include changes to capital gains tax that could have negatively impacted the effectiveness of the EMI scheme. The EMI scheme is seen as a valuable tool for life science businesses to use to attract and retain employees, so the sector is likely to take a keen interest in engaging with the Treasury on future changes.”

By Penny Simmons

Source: Pinsent Masons

To find out more about how we can assist you with your R&D Tax Reclaims please click here