19 February 2010
Taxman will pay you to innovate
The taxman isn't normally perceived as a friend, which is perhaps why research and development tax credits have been taken up by less than a third of small-to-medium enterprises despite the scheme having been running for 10 years.
Among architects, maybe there’s also a feeling that as they aren't wearing white coats and peering through a microscope, they are not involved in research and development.
Given that innovation is one of the key skills that architects are trained to develop, it is easy to see that this may be a false assumption.
Construction is a highly complex mix of project management, industrial and trade-based manufacturing and assembly. It is an area of huge technical uncertainty where technological advances in both the construction process itself and the management of the construction process are being pursued daily by architects as part of their desire to achieve excellence.
The development of advances in the use of information technology in the construction industry is just one activity which is potentially eligible for a tax credit. Applications can not only result in a reduction in corporation tax for R&D expenditure in the current financial year but also a cheque through the post as rebate of a proportion of the R&D costs for eligible activities in previous years.
Full details of the scheme are available online at Her Majesty's Customs & Revenue (HMRC) website. While the information is clearly written, it is framed in a very general way to include all types of business and therefore a little daunting.
Similarly, while there are regional departments within the tax office that deal with the R&D tax credit scheme, they are not geared to specific industries, such as construction.
In such circumstances the obvious source of advice is somebody who has understood the rules successfully. Richard McWilliams, director of research at Capita Symonds, has recently provided just this sort of service to Nigel Davies of Evolve. Evolve has over the last few years been working on standardising cad and bim systems. The tax credit system is expected to give it an unplanned but entirely welcome windfall to contribute to the cost of developing these solutions.
Capita Symonds has developed a working understanding of how the HMRC guidelines can be applied in the construction industry through the tax credit applications it has obtained for its own work. In combination with Constructiononline, it will be hosting workshops around the country over the coming months to help architects and other construction professionals consider potential claims.
Information from UK National Statistics indicates that within the SME sector, deductions from corporation tax liability due to R&D tax credits have grown from £10 million a year in the first year of the scheme's operation to £60 million a year in 2007-2008.
Meanwhile the total paid in rebates for work executed in previous years has grown to £190 million per year in the same period. With the government providing this level of incentive for innovation, there has to be a very good reason why companies aren't making a point of finding out more.
For further information
HMRC guidelines at www.hmrc.gov.uk/ct/forms-rates/claims/randd.htm
For details of the Capita Symonds workshops, contact: firstname.lastname@example.org
Read more: http://www.bdonline.co.uk/story.asp?sectioncode=528&storycode=3158309#ixzz0gTKNuf99
Since 2000 the government has encouraged innovation through the tax credit system.
To apply, companies need to be corporation taxpayers with fewer than 500 employees and a turnover of less than £100 million.
Eligible companies can receive 175% corporation tax relief (yes, substantially more than was spent) on qualifying research and development expenditure.
To be eligible a research and development project must seek "to achieve an advance in overall knowledge or capability in a field of science or technology through the resolution of scientific or technological uncertainty".
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