In plain words, Research & Development Tax Credits are a government allowance which is given to companies in order to encourage them to innovate more. Eligible companies are at liberty to reclaim as much as 130% in tax credits as the cost of R&D – a rather generous amount if you think about it.
As an architect, you should know what this means for your firm because, at the end of the day, you may be looking at a dramatically reduced Corporation Tax bill.
Why has the UK government even introduced such a scheme to begin with? Just to give companies a ‘push’ to innovate more? Good question – a very valid one.
The scheme was solely created to reward companies that conduct research and development. But that’s not all. In terms of “recorded” R&D, the UK seems to be having trouble keeping up with countries like the US or Germany, for instance.
However, this is not due to a lack of investment because that’s very much thriving in the UK. The real issue is that UK companies are not claiming R&D Tax Credits in a way other companies are in leading countries, including the above two. And this especially applies to the architectural sector.
Therefore, most of the “innovation” that is taking place across the nation is not actually being recorded by the UK government. Most people in the sector believe that R&D Tax Credits are not claimed to the extent they could be.
How the UK Government Views “R&D”
The common notion that R&D is only limited to men in white lab coats, working in a restricted area not accessible by other company personnel, and working hard carrying out experiments under microscopes and bright lights – well, let’s just do away with that. It’s a plain wrong way of looking at it.
The government has actually defined research and development in a broad way when it comes to R&D tax credits:
- An R&D Tax Credit scenario can only arise when the goal of a project is to actively attempt to achieve an advance in knowledge and/or capability in an area of science or technology.
- There is a requirement that any R&D project will require the resolution of scientific and/or technological uncertainties to achieve the advances sort. This could mean uncertainty about whether or how the advances could be achieved.
- Specific indirect activities related to all such projects also qualify as R&D.
Let’s put this into context and examine what it means for architects or architectural companies.
R&D in the Architectural Sector
Architects who have been successful in making claims for R&D Tax Credits point out that majority of architectural firms are more than likely engaged in activities that would automatically qualify them – however, they probably don’t know it.
Activities that qualify an architectural firm for R&D Tax Credits do not have to have cutting-edge technologies or science at their core. However, they need to be expanding the publicly available knowledge or capability in an area of science or technology.
This could entail a broad scale of activities – e.g. coming up with new and ‘innovative’ ways to make use of rammed earth, solving a problem within a residential project not solved before or developing a brand-new construction detail.
In fact, one architectural firm claimed R&D Tax Credits successfully for detailing a tree house within a prohibited area.
To be frank, there are hardly any architectural firms that are not already engaged in R&D. You see, architecture at its core involves a lot of innovation – it practically thrives off it. It is rather unfortunate that despite knowing this, many architectural firms in the UK are not taking advantage of R&D Tax Credit Relief or, in many cases, underclaiming.
Most firms that have claimed R&D Tax Credits have, in fact, cut their Corporation Tax bill or received a significant cash credit.
What Qualifies as R&D in the Architectural Context?
Ask yourself the following questions:
- Do you specialise in prefabricate structure design, or construct buildings off-site using novel techniques?
- Have you developed techniques for using existing materials in a new way?
- Are you actively trying to secure Passivhaus?
- Are you attempting to develop innovative software to enhance your professional services?
These are some very common questions which most companies consider before filing a claim. And if the answer is yes to any one of the above, you really should consider making an R&D Tax Credit claim.
Making Your R&D Tax Credit Claim
You should never attempt to make an R&D Tax Credit claim on your own – a tax adviser is the best person to consult – someone who has a demonstrable track record for getting R&D tax relief claims successfully processed for architects.
However, putting a claim together will require a bit of effort from your side as well so that your tax consultant can identify activities which qualify you for the tax credits.
An important thing to note here is that projects which have been completed during the last two financial years are also retrospectively eligible for claims.
R&D Tax Relief – What’s Allowable?
You can claim the following business costs via R&D tax credits:
- Salary costs pertaining to time spent during the activity
- Any pension or employer insurance attributed to the salary cost
- Overheads like heat, light and power.
- All computer licenses used for R&D
You must, though, make sure what you claim for is allowable and proportionate and because of this it’s a very good advice to seek the help of an external expert advice who specialises in claiming R&D Tax Relief. For more information please call Steve Smith on 07887 502445 or via email at [email protected]