There is still broad scope for R&D claims in construction
The UK built environment sector is in good health. The most recent post-Covid ONS figures place the value of construction new work at a record high of £132,989 million in 2022, up 15.8% year on year. Construction new orders rose 11.4% to £80,837 million, driven by private infrastructure, private commercial and other public non-housing.
Despite bullish growth, the built environment faces particular challenges with R&D claims. In compliance checks, HMRC has often taken the position that construction innovation is typically routine, rather than qualifying R&D – a trend that ignores the wealth of technological challenges the sector currently faces, as well as creating the illusion of a more onerous regulatory environment for the industry.
While the uncertainty is unwelcome, the approach from HMRC serves as a helpful course correction in demanding greater precision in identifying and presenting legitimate qualifying activities.Sector Analysis: Innovation Drivers in Construction
A confluence of market forces is creating genuine R&D opportunities in construction:
Sustainability Imperatives
Industry benchmarks such as Passivhaus, BREEAM are driving substantial innovation in:
- Novel construction methodologies
- Material science and repurposing
- Energy efficiency techniques
Material and Methodological Innovation
Market conditions are forcing the sector to reconsider traditional approaches:
- Deconstruction practices are gaining traction over conventional demolition
- Post-Grenfell regulatory changes driving novelty in fire-safe materials, especially composites, and innovative installation techniques
Heritage Restoration and Renovation
The adaptation of listed heritage properties to modern uses presents especial technical challenges requiring:
- Development of historically compatible materials, with improved or novel function
- Structural modification techniques that can work around heritage restrictions
- Specialised tooling and processes
Production Efficiency
Market pressures for accelerated delivery and margin improvement are advancing:
- Prefabrication and modular construction techniques
- Precision engineering solutions addressing design-implementation gaps
- Software: with coordination between trades now a precision activity, there is scope with the built environment to make genuine advances in software that addresses previously manual processes, or reduces complexity
Eligibility Analysis by Market Segment
Qualifying R&D activities vary significantly across the construction value chain:
- Architectural Firms: Primary innovation occurs during RIBA stages 4-5, when conceptual challenges transition to technological implementation
- Site Preparation Specialists: Technical solutions for challenging sites (floodplains, brownfields) may qualify when addressing unique environmental compliance requirements
- General Contractors: Eligible activities typically emerge when implementing complex architectural specifications or adapting to unforeseen site conditions
Compliance Framework for Successful Claims
With heightened regulatory scrutiny, robust documentation and structured technical narratives are essential. It is also useful to be able to draw a quantifiable connection between the R&D activities and broader industry goals and trends. Effective claims require:
- Clear articulation of the market context and project objectives
- Establishment of baseline or industry standard methodologies
- Detailed technical documentation of the uncertainties encountered and innovative approaches taken
This is where our multidisciplinary team comes into its own: we bridge the gap between your know-how and the regulatory approach required.
Our combination of sector-specific technical expertise and tax compliance knowledge remains critical for the continued success of your legitimate R&D tax credit claims in this evolving regulatory landscape.
Richard Lewis MISTC
Senior Technical Consultant
