We’re Hamilton Blake Consulting: specialists in R&D tax relief for architects. Welcome to our online guide to R&D relief for architects.
As R&D tax relief consultants, one of our biggest challenges is educating businesses about this under-utilised tax incentive.
There’s a bit of a misconception that only dedicated R&D firms can apply for R&D tax credits. This simply isn’t true: businesses from any sector can use this scheme to reduce their corporation tax bill if they have worked on an innovative R&D project.
Without innovation, the architecture industry couldn’t exist. Architects are constantly exploring creative new ways to use materials, overcome geographical challenges, and minimise the impact on the environment. Perhaps that’s why so many architects don’t realise they’re eligible for R&D tax relief: innovation is just part of their day job.
To help clear up any confusion, we put together this handy guide to R&D tax relief for architects. Keep reading to find out what R&D in architecture looks like, and how the tax relief incentive works.
What is R&D tax relief and how much could I save?
R&D tax relief is a statutory tax relief that can provide businesses a significant reduction on their corporation tax bill.
As you know, businesses only pay corporation tax on their profit (total revenue minus total expenses). If a business can prove that research and development was part of their expenses, they may be able to pay even less corporation tax. Only certain research and development costs qualify, so businesses must be able to show HMRC exactly how much they spent, and on what.
If eligible, R&D tax relief gives businesses a reduction on future corporation tax bills and allows them to claim a refund on overpaid corporation tax from the last two years.
The amount of tax relief your business will receive depends on the size of your company and the amount spent on qualifying R&D costs (more on that later). Trust us, though, when we say that this is a very lucrative incentive. On average, our clients receive around £40k reduction on their corporation tax: a significant saving, especially for smaller businesses.
What is R&D?
R&D is short for research and development. But when it comes to R&D tax relief, HMRC has a specific definition
To be eligible for R&D tax relief, your work must overcome a technical uncertainty to advance science or technology. Uncertainty is the key word here: you must be able to prove to HMRC that the answer wasn’t readily available to a competent professional, working in your field.
It’s worth noting that R&D is assessed on a project by project basis. Most of your firm’s work won’t be considered R&D; usually around 30% of our clients’ overall output is innovative research and development. Additionally, even unsuccessful projects may be eligible for R&D tax relief. If you spent time (and money) exploring possibilities, your firm may be eligible for this incentive.
What sort of R&D do architects do?
As we mentioned earlier, R&D is at the heart of many architecture firms. More than any other industry, this sector is always pushing new and innovative ways of doing things.
Each architectural project is unique, posing a unique challenge. Overcoming such challenges requires a period of thought, design, and testing before plans may be finalised and a build started. R&D often occurs when a firm must use bespoke processes or materials to overcome a unique challenges. In many cases, it can be shown that this work is advancing knowledge in its field.
Specifically, R&D often occurs in the following areas:
- Sustainability: making buildings more energy-efficient and environmentally friendly
- Value engineering: making projects more cost-effective while maintaining safety
- Build methods
- Material performance and analysis
- Prefabrication and modular builds.
However, your R&D tax relief consultant should look at all your projects individually to identify any research and development aspects.
What costs are covered?
To claim R&D relief, you need to be able to tell HMRC exactly how much you have spent on research and development. However, not all R&D expenditure counts as a qualifying cost.
The largest R&D expenditure for architects is usually staff costs. This includes employee salaries, National Insurance contributions, and pensions.
Other qualifying R&D costs include:
- Subcontractor costs
Expenditure on the following areas is not considered a qualifying R&D cost by HMRC:
The production and distribution of goods and services
- Capital expenditure
- The cost of land
- The cost of patents and trademarks
- Rent or rates
Why does HMRC reward architects for R&D?
The R&D tax relief incentive rewards businesses for taking risks to solve problems. The work that architects do is often innovative and ground-breaking: it can help advance its field and provide better ways of doing things.
Think about it: innovation among architects create buildings that are less polluting, cheaper, and better for the planet. That’s good news for all of us.
Additionally, HMRC wants to reward R&D because it helps boost the economy. It can increase productivity, employment, and spending, all of which are important for the economic health of a country. Read more about why HMRC rewards innovation here.
R&D is an activity: a specific part of an innovative project. As well as being able to prove R&D spend, HMRC requires architects to demonstrate a project’s life cycle to make an R&D relief claim. They want to see exactly where the R&D takes place in a project.
The timeline below demonstrates where R&D typically appears in a project.
Your R&D consultant will use project timesheets to demonstrate this to HMRC. You will also need to know the exact start date of a project.
How do architects make R&D tax relief claims?
Different advisers may have their own process for supporting clients through the R&D relief journey. Here’s how Hamilton Blake Consulting works with architects for their R&D tax relief claims:
We always start with a quick call to explain our services and to get to know you. We’ll gather some information about your business, including which of your projects may contain a relevant R&D element.
Onsite working meeting
We’re all about the personal service, so we prefer to visit clients in person (where possible). We’ll spend 2-3 hours in your offices, discussing relevant projects from the last two years. A partner from Hamilton Blake Consulting will be present to take notes and ask questions that will form the basis of our report.
Transfer of information
You’ll need to send us project timesheets and certain other information so we can prepare the report for HMRC. Don’t worry, we never ask clients to prepare any additional documents.
Creating and submitting the report
Our report for HMRC will clearly demonstrate the elements of R&D within our client’s project. We will send this to you for sign-off before submission to HMRC. It will also be reviewed by a partner at Hamilton Blake Consulting.
We have a 100% success rate when it comes to R&D tax relief claims for architects. However, if HMRC queries anything (which they are entitled to do so), we will defend them at no extra cost to you. We form multiple-year relationships with our clients. After submitting the initial claim, we’ll work with you throughout the year to get your next claim ready for HMRC.
Why Hamilton Blake Consulting?
Unlike other R&D firms, we specialise in corporation tax relief for architects. In fact, 60% of our clients are architecture firms, with a further 15% working in related fields such as engineering. This means that we’re experts at identifying the R&D elements in architecture projects. Simply describe your work in your own words, and we’ll tell you whether you’re eligible for R&D tax relief.
Check out a case study for one of our architecture clients here.
Want to find out more about R&D tax relief and our friendly, personable service? Get in touch with one of our consultants.