Innovation in architecture: Realising the value of R&D tax credits

Innovation in architecture: Realising the value of R&D tax credits

Innovation is arguably the most valuable ingredient in any forward-thinking architecture practice. However, the pressures of the pandemic have shone a new light on the importance of innovation. Jonathan Scott, tax partner and architecture sector specialist, explains.

Despite the challenges of the past few years, architecture remains a sector in which innovation is rife. Project delays, cash flow disruption, and ambitious sustainability objectives have tested new the sector in new ways. In spite of these pressures, the industry remains resilient and solution-focused.

As we look to the future, the built environment sector is under more pressure than ever to innovate. The Government’s ambitious net-zero objectives are fuelling innovation on an unprecedented scale. Likewise, the issue of addressing embodied carbon within existing buildings is driving adaptation and retro-fitting to a new level. But all of this requires time and money. And given the inherent risk involved in attempting to overcome uncertainties, it’s vital that architects make the most of the resources they invest in the pursuit of innovation.

For those who dare to innovate, push the boundaries of science and technology, and find solutions to technical design challenges, Research and Development (R&D) tax credits could potentially offer an invaluable opportunity for qualifying activity.

What is R&D relief and how can it help architecture practices?

R&D tax relief supports businesses who are actively overcoming technological challenges and developing innovative solutions. The relief works by providing an uplift on qualifying R&D costs. This is then offset against corporation tax, or if a business is loss-making it can generate a cash refund.

Providing your practice meets the SME criteria, this uplift will be 130% of qualifying expenditure, which could help to ensure that your firm remains competitive in an ever-evolving industry if you qualify.

However, awareness of the relief remains an issue for the sector. Despite being highlighted by industry bodies such as the RIBA, a great number still overlook the opportunity due to a lack of understanding and the fact that many innovative activities are often thought of as being just part of the job.

The reality is architecture is a knowledge-intensive field. In our experience, it ranks as one of the most R&D focused sectors. 

What activity qualifies?

The scope for qualifying R&D activity in the architecture and built environment sector is wide-ranging. Regardless of whether you’re a world-leading firm changing the face of a city or a local architect breathing new life into a listed building, innovation is happening across every level of the industry.

At the core of this innovation is R&D. This could entails providing tangible solutions to design uncertainties, doing new things to overcome technical challenges, or investigating how design and technology can be used to resolve issues within a project.

Just recently, we recently worked with an architect who was developing a building subject to extreme weather conditions. The firm developed a new solar shading modelling tool to allow it analyse the various shading orientations at different times throughout the year, ensuring optimal shading configurations and minimising the risk of thermal shock to the building. In using new technology to overcome design issues, they qualified for tax relief.

Think back to any architectural projects in which you’ve solved problems or overcome uncertainties – be it design, process, efficiency, sustainability, visualisation, or fabrication. The chances are a few will come to mind.

What costs can I claim for?

If you qualify for relief, the time spent by your teams in overcoming technological challenges and design uncertainties will make up the bulk of most R&D claims. This could stretch from Architectural Assistants who are hands-on in overcoming design problems to BIM Designers who develop virtual models to establish whether new construction methods are technologically feasible. It even goes as far as Director level staff who, as senior figures with extensive experience and knowledge, are often leaned upon to when faced with increasingly technical challenges.

As well as direct staff costs, you can also claim for certain subcontractor costs. More often than not, bespoke projects require the involvement of technical, structural and engineering consultants. However, there is a cap on the percentage of costs which you can claim for in relation to subcontracted costs, so care must be taken when analysing qualifying R&D activity.

Software is also a significant expense for many practices and providing the software is used directly in R&D activity it can be claimed as qualifying expenditure.

Get in touch and find out how we could support you practice 

Our team work with architects across the UK, from local independent firms to international AJ100 practices. We have a deep understanding of the built environment sector, which enables us to dig deep and uncover qualifying projects and costs that may have otherwise gone unnoticed.

With a team comprised of qualified tax advisors, sector specialists and ex-HMRC inspectors, we can support you from initial eligibility assessments all the way through to analysing financial figures and submitting reports to HMRC. Get in touch to find out how we could support your practice with your R&D tax relief claim.

 *All information true to date of publication.