Coronavirus Creating Cash For Construction Companies?

Construction businesses that have adapted to the new working conditions caused by the coronavirus could be entitled to a cash rebate from HMRC. Many firms have had to use innovative strategies and techniques to ensure that sites remain covid-safe whilst maintaining the same level of performance, coordination, and results.

The government-funded R&D incentive seeks to financially reward businesses for striving to improve their products, services, and processes or for creating new ones.

Eligible R&D activities include:

  • Overcoming technical challenges
  • Creating and testing prototypes
  • Streamlining processes
  • Trialing new or substituting materials
  • Developing bespoke software
  • Trial and error
  • Industry firsts

For example, construction companies that have adapted to covid by redesigning sites and introducing new safety measures could qualify for the R&D incentive. The issue is, many businesses assume they won’t qualify as they aren’t doing ‘typical’ R&D which will leave millions of pounds left unclaimed.

The incentive works by constructing an R&D claim based on overhead costs rather than capital expenditure. These costs are then enhanced to make up the claim. They include:

  • Staff costs
  • Sub-contractors
  • Materials consumed
  • Utility costs
  • Some software costs

HMRC reports show the construction sector made almost 4000 claims in the 2018-19 period, giving out over £200 million and this number is rising (R&D statistics, HMRC, September 2020).

Adaptations the industry faced

Since the pandemic started a year ago, the construction sector had to massively alter protocol on sites as well as business plans and procedures. The utmost importance was placed on construction sites becoming ‘covid safe’ and remaining a safe environment for contractors, visitors, and staff. Whilst the public was still adapting to social distancing regulations, face masks, and regular sanitising, the construction sector acted quickly to ensure sites could continue running under the new government legislation. Many construction businesses invested in PPE to keep their staff safe as well as signage to clearly mark walkways and 2 metre distances. If staff began showing covid symptoms, they were swiftly sent home and told to isolate as well as those who had come into contact with them. Walkways were widened and full-time cleaning staff were employed to ensure workstations were regularly sanitised. On-site sales arenas that had previously thrived on footfall were open on an appointment-only basis, with their layout redesigned to accommodate social distancing. These physical alterations were at the individual expense of construction companies.

The knock-on effect of these changes was that the productive capacity of sites was significantly reduced which led to a loss in cash flow as fewer buildings were being completed. In many cases, buildings were only allowed a maximum of 2 traders in at once, slowing the rate at which builds were completed as multiples teams could not work on a property simultaneously. To adapt to the reduced supply, the industry eased the regulations regarding the legal completion of buildings and customer contracts following an increase in cancellation rates.

Using innovation to overcome challenges

Many construction firms used innovative techniques to ensure staff and customer safety. Examples are:

  • Building bespoke CRM systems and investing in software to track customer appointments and investing in vehicles to visit customers
  • Investing in equipment that made two employee jobs a one-person job
  • Trialing new ways of doing things allowed for social distancing
  • Streamlining processes whilst using fewer employees
  • Using technology to hold remote meetings between architects, site managers, and designers to do things such as sharing drawings online. This can be as simple as zoom/teams calls.
  • Using BIM (Building Information Management) systems to co-design and develop buildings as well as troubleshooting problems. You can claim R&D credits back on BIM implementation and project use.

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