Innovation and creativity can be defined as finding a way of solving a problem that couldn’t be achieved when the standard approach was applied. This is what architects do on a regular, if not daily, basis and why it is seen as one of the most creative jobs globally. How does this tie in with the UK R&D tax credits?
R&D tax credits have been around for about two decades. One of the principal reasons it was established was to incentivise companies to maintain a highly skilled and innovative workforce in the field of science and technology. Therefore, architect firms are likely to qualify for this government incentive, as well as, grants.
We are now facing a global pandemic, which has seeped into every facet of our lives: societal, economical and health amongst many others. Architecture not only affects society on a high level but also on a more personal level, the built environment can have a profound impact on its occupants. The demand in step-wise change to how we live and work is inevitable and architecture will be at the heart of driving the solutions where standard approaches will not apply (e.g. the conversion of commercial units to residential dwellings, integration of materials and technology to mitigate transmission etc...). Consequently, architects will be undertaking qualifying activities for R&D tax purposes and should be preparing R&D claims for these innovative solutions.
RIBA’s partner in claiming R&D tax relief, BDO LLP, have provided useful advice to be considered when submitting a claim:
1. Seek professional and ICAEW regulated advice – not just the lowest fee
The year-on-year 20% increase in R&D claims has meant HMRC are scrutinising claims and recently published HMRC statistics indicating they have raised enquiries relating to £610m expenditure. Furthermore, Professional Conduct in Relation to Taxation (PCRT) developed by several professional bodies and associations, including ICAEW, now requires all values submitted within tax computations (including R&D tax claims) to be conducted on a sustainable basis. The interpretation means that if R&D claims have not been prepared by a ICAEW regulated firm, the claimant companies need to be aware that they may face additional review fees from their accountants during submission.
2. Industry expertise
Having your claims supported by advisors consisting of individuals with industry experience within the built environment means they have a greater understanding of the supply chain and where the R&D is likely to reside to help identify areas that are generally overlooked in R&D claims. Their familiarity with the R&D eligibility criteria and the industry means they are able to steer the technical investigations and deliver accurate claims rather than just being led by the companies’ technical teams who will not be as familiar with the R&D criteria and may result in conservative or aggressive claims.
3. Tax specialists
Ultimately, R&D claims can only be submitted via tax computations and therefore, having tax specialists support your claims is just as important as having technical individuals. Knowing that your advisors have a deep understanding of the legislation will provide the confidence that your claims are being challenged from both a technical/engineering and tax perspective to deliver optimised, yet sustainable R&D claims.
This really is a time when architects who continue to innovate (internally and/or on client facing projects), could get a significant step ahead of their competitors. The government backed R&D tax incentives help de-risk and incentive this type of venture and help propel us all into sunnier times.
To add to the good news, HMRC has committed to reviewing and paying out R&D claims within 28 days of submission and we are seeing this in practice. Where a company has obtained government grants and loans to help run the business (e.g. Bounce Back Loans) it need not jeopardise the R&D claim as long as it does not directly subsidise the qualifying R&D work.
To sign up to our free webinar on R&D tax credits for architects on Thursday 8 October at 11am, please get in touch with the RIBA Business team on +44 (0)20 7307 3737 or email firstname.lastname@example.org.