The new R&D tax credit scheme, slated for launch in April 2024, has been closely followed by investors in construction innovation. The government has increased the tax credit from 1 April 2023 to 20% of qualifying expenditure, which is an excellent incentive to boost construction productivity. However, there were initial concerns that the text implied a restriction in claiming the tax credit in cases where the R&D stemmed from sub-contracting, which would have been disastrous for many SMEs and large businesses in the construction sector.
Following close engagement with the government, the Construction Leadership Council (CLC) is pleased to report that specific positive references to subcontracting and the construction industry have been included in the Autumn Statement, with the aim of preserving current eligibility for the tax credit. The CLC, however, had valid concerns regarding the draft wording of the legislation released in the Draft Finance Bill 2023-24, which could still pose problems for the construction industry, where R&D activities had been “contemplated” further up the chain. The CLC is committed to ensuring that the R&D tax credit remains available to all firms in the construction supply chain that initiate their own R&D activities. HMT and HMRC have confirmed their willingness to work with the CLC and other industry professionals to ensure that the guidance is clear and that the final legislation reflects the position in the Autumn Statement. Real-world examples and case studies, including those from the construction industry, will be included in the guidance note, which should be available by early 2025.
Miranda Chamberlain, Group Head of Tax at Mace Group, shared these important updates.