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2020 hit the construction sector hard, not only due to COVID delays and site disruption, but challenges as a result of Brexit with mounting concerns over shortages of materials and labour. The rising cost of raw materials and increasing legislation means profit margins are already low, so it’s no surprise that cash flow is a huge concern to contractors and construction employers as we begin to plan for 2021.

The UK faces a huge cash flow challenge, with the Bank of England predicting a £180bn business cash flow deficit in 2020/21. As cash remains king, what can construction businesses do to build back reserves and ensure they are in the best position possible?

Do you have cash to unlock?

Whether you need to improve cash flow to reinvest in your business for growth, to meet growing health and safety legislation or you simply want to make your business more fluid in a challenging economy, it’s worth exploring which Government support and reliefs you could be entitled to, or even where the reliefs you are claiming are not fully maximised.

In the UK, less than 3% of R&D claims were made by constructions companies. In 2020 we helped businesses in the sector to claim over £11.5m in tax reliefs and clients are often surprised by how much they are able to claim where they didn’t think they were eligible.

We helped one of our construction clients to backdate reliefs and access almost £1m over two years in unclaimed cash.

How to maximise reliefs?

The sector is full of challenges that require inventive solutions, and whilst R&D claims have been seen to relate solely to the innovative use of materials, claims are often more bespoke and can relate to solving problems on site with new processes or tackling challenges with technology. It’s often less about the what you do, but how you do it.

Carrying out a full audit of qualifying activity with a specialist could quickly unlock cash for the business, which could provide an uplift on existing qualifying activity and a much bigger tax deduction or cash refund. As an SME you’re entitled to a 130% uplift on any qualifying expenditure.

It’s not just about R&D, other reliefs can also help to boost cash flow and should be part of careful tax planning, not just as a one off but to improve annual cash flow to support business goals. Other reliefs include Land Remediation Relief (LRR) which enables businesses to claim relief from corporation tax on 150% of the cost of remediating contaminated or derelict brownfield land or property. Capital allowances are an effective way of reducing the post-tax cost of investing in equipment, machinery, and internal building fixtures. However, many businesses are missing out on tax reliefs they could be claiming.

One thing is certain: you could be sitting on more cash than you realise.

It can take an expert eye to appreciate the full potential of a claim, especially when it comes to R&D and it requires an experienced hand to ensure claims are robust and fully compliant. It’s often difficult to appreciate exactly how much of day-to-day work qualifies for R&D reliefs, but it can include everything from creating or experimenting with new materials, devising new energy-saving techniques, working with new technologies, overcoming technical problems, developing or improving tools and equipment, improving reliability, safety and performance… and much, much more.

You can download our guide to unlocking cash in construction businesses here. Alternatively, get in touch for a no-obligation assessment of what your claim could be worth.

Are you unclear on any COVID-19 related issues that your business is facing? Get in touch and we will be happy to assist you

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About the author

Jonathan Scott

With a detailed understanding of tax planning, Jonathan provides tailored and proactive advice on a wide range of tax matters, ensuring his clients are structured in the most efficient way. He provides expert advice on corporate re-organisations, company sales, mergers and acquisitions, as well as estate, trust and IHT planning. Jonathan leads the specialist Tax Incentives and Reliefs team, covering R&D tax relief, Capital Allowances, Land Remediation tax relief, and Patent Box.

The part of my role I enjoy the most is being at the forefront of creativity and innovation, and seeing some really ground breaking ideas come to life as a result of the incentives and reliefs on offer.

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