“Those of you investing in construction innovation will have been closely following the developments this year around the new R&D tax credit scheme, set to launch in April 2024. With the government increasing the tax credit from 1 April 2023 to 20% of qualifying expenditure, it is a valuable incentive to boost construction productivity. Initial wording, released in summer 2023, implied a restriction in claiming the tax credit where the R&D stemmed from sub-contracting. This would have had disastrous consequences for SMEs and large businesses alike in the construction sector.
After close engagement between the CLC and the Government, we were pleased to note specific positive references to subcontracting and the construction industry in the Autumn Statement, which aims to preserve current eligibility for the tax credit. However, there were valid concerns from the industry, following the release of the Draft Finance Bill 2023-24, as the draft wording of the legislation could still pose problems in the construction industry, where R&D activities had been “contemplated” further up the chain. The CLC wants to ensure that the R&D tax credit is protected for all firms in the construction supply chain that initiate their own R&D activities. HMT and HMRC met with Mark Reynolds (Co-Chair of the CLC) and confirmed their willingness to continue to work with the CLC and other industry professionals, to ensure the guidance is clear and that the final legislation reflects the position in the Autumn Statement. The guidance note will provide real world examples and case studies, including those from the construction industry and should be available by early 2025.”
Group Head of Tax