The Key to Claiming R&D Tax Credits in Architecture
- Do your architecture projects qualify?
- Typical examples of qualifying projects
- Costs that you can and cannot include in your claim
- Tips for maximising the value of your architecture claim
- Frequently Asked Questions
1. Do Your Architecture Projects Qualify?
The first stage in claiming R&D Tax relief in architecture is determining to what degree valid R&D is being performed and to assess which field of science or technology the claim would fall under.
Completed projects that took place in the previous two financial years should also be looked at because claims can be made retrospectively for that period.
Broadly speaking, if an architectural project includes any unique adaptations, non-standard elements (structural, materials used etc.) or has faced particularly difficult technical challenges, then it should be examined more closely for eligibility. HMRC sets out two main requirements for a project to be considered as R&D for tax purposes:
1.1. Seeking to achieve a technological or scientific advance
An eligible project or activity should theoretically add to the current pool of technical or scientific knowledge in architecture. The advance in knowledge would not necessarily need to involve tangible assets but can also involve design or process improvements. Note: Any intellectual property that is included in a claim would remain protected throughout the claims process and does not need to be shared publicly.
1.2. Overcoming a level of technological uncertainty
In other words, it is not known at the outset if the solution to a technical challenge was either possible, or alternatively, how in practice to achieve it. Even if someone else in the industry has already achieved the same thing, you can still potentially make a claim if the solution is not in the public domain and not obvious.
The Eligibility Threshold
In architecture, the above two criteria are often met as a result of environmental factors affecting the desired solution, such as thermal performance, structural characteristics, or specific materials and may subsequently require new and appreciably improved processes or solutions that will in turn qualify for the R&D relief.
It is also important that no non-qualifying activities are included within the claim and this is something that can often be challenging, as these are rarely tracked separately within a project. When making a case to HMRC as to why the work qualifies, we will work with you to ensure that only the eligible activities have been accurately costed and included in the claim.
Related article: Avoiding an HMRC enquiry when making an R&D claim
2. Examples of Architectural Projects that qualify for the R&D scheme:
Below we explore just a few scenarios of how architecture firms can become eligible for the R&D tax credit scheme. If you are unsure of your eligibility or would like further information, you are welcome to contact us for an objective assessment at no obligation to you.
Architectural projects that give rise to unique structures are likely to meet the criteria for the R&D scheme because their experimental nature requires technical solutions that are new or not obvious. Firms do not need to pioneer design-types or technique to become eligible – they can become eligible through appreciably improving existing techniques.
The evolution of architecture is deeply connected to the developments of new materials. Recent innovations such as bio-plastics, structural 3-D printing and solar-thermal cladding, are empowering architects to push the boundaries beyond what is currently possible.
Architectural projects that incorporate material types that are not widely used may introduce a higher uncertainty factor and might require more testing and are therefore perfectly suited to the R&D scheme. It’s worth noting that qualifying projects do not
need to have a successful outcome to qualify.
To meet fire-safety regulations, architects must take into consideration many factors in their designs such as the fire growth rate, ventilation and structural integrity in the event of a fire. These requirements can conflict with a building’s structural or aesthetic goals so new approaches are sometimes needed to achieve those goals while keeping the designs safe.
These types of project elements are likely to qualify for the R&D scheme because of the technical challenges they present or because of a unique adaptation that is needed in how they are implemented. For a complex building designs, it’s also likely that a specialist fire-safety consultancy would be needed to advise on how to best employ fireproofing methods within the structure. The costs of this type of sub-contracting can also be included in the R&D claim.
While architecture tends to be rich in opportunities for claiming R&D tax credits, there are many other sectors that contribute to an architectural project that can also be used to claim. For example, if a practice needs to outsource a specialist engineering firm or to hire subcontractors that specialise in certain building materials, these operational costs that contribute to the goals of an eligible project, can often be included in a claim.
Because sustainable architecture is evolving in so many directions, it continues to be an area where a high rate of innovation is taking place. In some cases, architects and engineers are now achieving ‘net-zero’ energy usage, with some building actually sending excess energy back into the power grid.
The integration of solar and turbine energy into structures, on-site water treatment, use of ‘green’ facades, recyclable materials and the Passivhaus standard are just a few examples of sustainable architecture approaches that are likely to increase a project’s eligibility for the R&D tax credit scheme.
Most of these methods have been around for a while, but they would still likely qualify where there is a non-standard integration or where a unique modification is made to meet a project’s goals.
3. Costs that you can and cannot include in your claim
In architectural projects typical costs that are included in an R&D claim are:
- Pro-rata salaries of employees over the period where they worked on eligible activities
- Sub-contractors hired by the architecture firm to carry out eligible activities. These could include engineering firms, environmental consultants, fire-safety experts etc.
- Costs of materials that contributed to the eligible project
- Software licences used within the bounds of the eligible activities
Costs that cannot be included are:
- The running costs of the business (rent, electrical, travel costs etc.)
- 3rd party costs that are recharged back to clients
4. Tips for maximising the value of your architectural claims
At the project planning phase, gain a good understanding of what activities are likely meet the criteria for the scheme and how the time of team members will be split between qualifying and non-qualifying projects. Then find a way for architects and other team members to easily record or label the time spent on qualifying R&D activities on an ongoing basis.
This will ensure help in capturing the maximum amount the qualifying expenditure without the risk of underclaiming or being unable to defend your claim if HMRC decide to audit it through an enquiry. For more on this topic read our article: Good habits and best practices for tracking R&D claim data
Contrary to popular belief, you can also include costs of common or typical activities in your claim as long as they are directly contributing to resolving the overall uncertainty of a qualifying project. For example, the cost of digging a hole can be included if that hole was needed to test out the integrity or load-bearing capability of a structure.
Many architectural practices, particularly smaller ones are structured to pay the principal architects (who are often also the business owners) in dividends rather than salaries. Dividend payments cannot be included in an R&D claim, so consider restructuring if your firm carries out a significant amount of R&D.
Avoid triggering an enquiry by keeping up to date with the latest legislation governing the scheme.
⇧ Back to top
5. Frequently Asked Questions
Yes. You can file claims for eligible projects that were delivered within the past two years from your most recent year-end.
Usually yes, though there are some differences between claiming for in-house R&D and subcontracted R&D. To learn more, read our article on this topic here.
No. You will need to be registered as an LTD or LLC in order to be able to claim.
For a full explanation on how calculate your claim value, click here
⇧ Back to top
Innovation Plus have an outstanding record in successfully claiming R&D tax relief in architecture and have developed a tried and tested process that maps the industry-standard RIBA stages onto the R&D Tax legislation. In this way, we are able to use the information that you are already tracking to support and secure a successful R&D tax claim that yields the maximum value for your firm.
Contact us here if you have any questions or if you would like us to scope out your eligibility and estimated claim value, without any obligation.