Ffrom 2025, the Future Homes Standard will require new-build homes to have low-carbon heating and meet demanding levels of energy efficiency. The aim is a 75 to 80% reduction in carbon emissions compared to homes built under the current Building Regulations.
In addition, local planning authorities are also likely to make increasing demands to improve the environmental performance of new buildings of all types. If that wasn’t enough, many customers will be concerned about the carbon incorporated and how to reduce the amount involved by reusing materials that have been discarded in the past.
To achieve these goals, developers and their supply chains can take a number of approaches, including upgrading heating systems and replacing familiar technologies with low-carbon alternatives.
These pressures will demand innovation as the industry faces radical changes in the ways it has long worked.
Among the problems, however, is that innovation itself is costly. A lot of time can be spent on research and development (R&D), with the outcome always uncertain – a process of figuring out what works and what doesn’t before any new material or technique can be used and make money for a developer and contractor
The government has recognized this difficulty and is supporting R&D work through tax credits.
However, like anything else involving access to public support, companies must convince HM Revenue & Customs (HMRC) that the money involved was actually spent on R&D and not just an adjustment to accepted best practice.
Iain Butler, director of Buzzacott, has long experience of guiding construction companies through the maze of R&D tax credits and expects the Future Homes Standard and other changes demanded by planners to produce many new candidates for the credits.
It explains that a small business could recover 20 to 25 percent of its qualified R&D costs, either through tax savings or cash, while for larger companies with 500 or more employees the rate is 11 percent. But what constitutes a “qualifying cost” is a matter of negotiation.
Butler says: “Companies in the construction industry have to find innovative ways of working, whether it’s within an already designed building or with built-in carbon when dismantling an existing building and trying to keep as much of it as possible. This increases R&D costs and credits can help them budget by indicating which innovation costs they can offset with taxes.”
Qualification for an R&D tax credit does not require an entirely new invention, as new adaptations of existing techniques may be accepted. “These are projects where you’ve taken that count out of your head,” says Butler. “Where you might be combining systems and technologies in a new way, or developing pieces within others that are new or different.”
Examples might include managing smoke inside a building differently to meet a new fire regulation or attempts to reduce solar loading.
Tackling embodied carbon will require new ways to reuse materials and a new process for deconstructing a building, rather than simply tearing it down.
Butler sees some reluctance to innovate, as construction companies often fall back on traditional best practices. But he says, “For new demands coming in, the best practices are simply not applicable.”
Good advice on R&D credits is vital as HMRC makes more frequent and random inquiries about R&D tax claims and may want to interview senior technical staff at a company about what has been done .
Butler concludes: “R&D is something that companies need to think about, even if it’s not high on their agenda at the moment.”
SPONSORED BY BUZZACOTT
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