Construction R&D: Cut the Noise, Claim the Real Innovation

Most construction firms are innovating. The problem is that the R&D tax system in this sector has been flooded with claims for work that was never R&D in the first place.

HMRC’s own data shows construction has one of the highest error rates for R&D claims. For years, aggressive advisers have told contractors that simply building projects — houses, roads, M&E installations — counts as R&D. It doesn’t. And many firms are now dealing with enquiries, clawbacks, and penalties as a result.

The reality is more nuanced:

• A lot of what’s been claimed in construction is not R&D and never was.
• But there is genuine, high‑value R&D happening on real projects that often goes unclaimed.

If you’ve been burned by bad advice, or you’re wary of HMRC scrutiny, that’s understandable. It doesn’t mean you should ignore legitimate relief that the legislation intends you to claim.

What Construction R&D Is Not

Most rejected or challenged claims fall into the same traps. The following do not qualify as R&D on their own, even if the project is large, complex, or commercially risky:

• Standard building work

Constructing buildings or infrastructure to established designs using known methods — even if the job is big, fast‑track, or logistically difficult.

• Routine design to codes of practice

Designing structures using Eurocodes, British Standards, manufacturer data, or standard engineering tables — even if the calculations are heavy.

• First‑time use of known methods

Using a technique that’s new to your firm but well‑established in the industry (e.g. first use of post‑tensioned slabs, standard modular systems, common ground improvement techniques).

• Commercial or programme pressure

Tight deadlines, liquidated damages, difficult clients, supply chain issues, or complex logistics are commercial problems, not technological uncertainty.

• Purely architectural or aesthetic design

Striking architecture is not R&D unless the form creates genuine structural or building‑physics uncertainty that can’t be resolved with standard methods.

• Value engineering and cost‑cutting

Swapping materials, simplifying details, or re‑sequencing work to save money is not R&D unless it involves resolving genuine technological uncertainty.

• Standard remediation and ground treatment

Using established piling, surcharging, lime stabilisation, or similar methods in conditions where their performance is well‑understood.

In plain terms: if a competent structural, geotechnical, or construction professional could have worked out how to do it using existing knowledge, published guidance, and standard methods, it’s not R&D.

The legal test is whether there was genuine technological uncertainty that could not be readily resolved by a competent professional in the field.

Where Construction R&D Does Exist

Real construction R&D happens when your engineers and technical teams face problems that don’t have known, reliable solutions. The uncertainty must be technological, not just commercial.

1. Ground and Foundations

R&D often arises where ground conditions make standard solutions unreliable or unusable, for example:

• Contaminated or highly variable ground where standard piling design can’t reliably predict performance.
• High water tables, adjacent structures, or sensitive assets that rule out normal methods.
• Situations where site investigation reveals conditions that standard design approaches can’t safely or efficiently address.

If you’re developing or significantly adapting foundation or ground improvement solutions because the usual playbook doesn’t work, that may be R&D.

2. Structural Innovation

R&D can exist where the structure itself pushes beyond normal code‑based design, such as:

• Long spans, extreme slenderness, or unusual load paths.
• Complex or irregular geometries where code rules don’t give reliable answers.
• Adaptive, moveable, or transformable structures.
• Interactions between structural elements that require bespoke analysis (e.g. advanced FEA, CFD, or physical testing) because standard methods are inadequate.

Here, the R&D is in resolving how the structure will actually behave, not in simply delivering a challenging project.

3. Complex Temporary Works and Construction Methods

Sometimes the method of building is where the R&D sits:

• Heavy lifts in constrained environments with uncertain stability or deflection behaviour.
• Bridge slides, jacking, or launching operations where structural behaviour during the operation is not well‑covered by standard guidance.
• Complex demolition or sequencing where temporary load paths and stability are uncertain.

The case COLLINS CONSTRUCTION LIMITED v HMRC [2024] UKFTT 00951 (TC) is important here: it confirms that qualifying R&D can sit inside commercial construction contracts where there is genuine technological uncertainty in the temporary works or methods.

4. Constrained Site Working

R&D can arise where you must work:

• Over or adjacent to live rail, highways, or major utilities.
• In or around occupied buildings or critical facilities.

If standard methods can’t be used safely or practically, and you must develop bespoke approaches where the interaction between your works and the live environment is technologically uncertain, that may be R&D.

5. Retrofit, Refurbishment, and Change of Use

Existing buildings often create genuine uncertainty, for example:

• Heritage structures with unknown or unusual construction.
• Pre‑war or early concrete frames with limited records and atypical detailing.
• Buildings being upgraded for new fire, seismic, thermal, or loading standards where behaviour under new demands is uncertain.

Where you must investigate, model, test, and develop new solutions because standard rules don’t reliably predict performance, there may be qualifying R&D.

6. Environmental and Energy Performance

High‑performance and low‑carbon targets can create building‑physics R&D, particularly where you’re aiming for:

• Passivhaus or equivalent ultra‑low energy standards.
• BREEAM Outstanding or similar.
• Net zero operational carbon with tight comfort and usability constraints.

The R&D is typically in:

• Novel approaches to thermal bridging and airtightness.
• Complex ventilation and overheating strategies.
• Unusual material combinations where moisture, thermal, and structural behaviour are uncertain.

7. Materials and Product Development

R&D is often clearer where you’re developing or significantly adapting materials or systems, such as:

• Ultra‑high performance or fibre‑reinforced concretes.
• Low‑carbon or alternative cementitious binders.
• Self‑healing, self‑sensing, or otherwise novel materials.
• Prefabricated systems or components whose performance in a specific application is uncertain.

If you’re formulating, testing, and iterating to achieve specific performance under real‑world conditions, that’s classic R&D territory.

The Merged R&D Scheme (From 1 April 2024)

For accounting periods starting on or after 1 April 2024, most construction companies will claim under the merged R&D Expenditure Credit (RDEC‑style) scheme.

Key points:

• Headline credit rate: 20% of qualifying R&D spend.
• Typical net benefit: around 15p per £1 of qualifying spend after 25% Corporation Tax.
• Illustration:

£200,000 qualifying R&D costs → c. £30,000 net tax benefit (subject to your actual tax position).

For loss‑making companies where qualifying R&D is ≥30% of total expenditure, the Enhanced R&D Intensive Support (ERIS) may apply, with a payable credit of up to 27%. This is less common for main‑contracting businesses but can be relevant for specialist design, technology, or product‑development firms in the construction ecosystem.

What Costs Can Be Included?

Under the merged scheme, typical qualifying cost categories for construction R&D include:

• Staff costs

Salaries, employer NIC, and pensions for:

• Engineers and designers.
• Technicians and CAD/BIM staff.
• Site staff directly involved in trials, testing, or developing new methods.

These must be apportioned by time spent on qualifying R&D activities.

• Subcontracted R&D

UK‑based subcontractors carrying out R&D under your direction and control, claimable at 65% of the invoiced cost. This does not cover routine construction carried out to your design.

• Consumables and materials

Materials that are consumed or transformed in R&D, such as:

• Trial pours and test panels.
• Prototype elements.
• Mock‑ups used for testing and then scrapped.

Materials that become part of the finished, saleable building generally do not qualify.

• Software licences

Specialist tools used directly in R&D, e.g.:

• FEA and CFD packages.
• Geotechnical and structural modelling tools.
• BIM and simulation tools where used for R&D analysis.
• Cloud computing and data costs

Eligible from 1 April 2023 where used for R&D modelling, simulation, or data processing.

• Utilities

Heat, light, and power used in R&D activities (e.g. test facilities, labs, or dedicated R&D areas on site).

Overseas restrictions: for periods under the merged scheme, most subcontracted R&D and externally provided workers must be UK‑based to qualify, subject to limited exceptions.

Why HMRC Scrutinises Construction Claims

Construction claims are on HMRC’s radar. Common red flags include:

1. Calling Routine Work “R&D”

If your narrative reads like a project brochure — “we built a complex hospital / tower / bridge” — rather than a technical explanation of specific uncertainties and how you resolved them, expect questions.

HMRC’s specialists understand the difference between:

• A complex but standard project, and
• A project that genuinely pushed the boundaries of current construction technology.

2. Weak or Vague Technical Narratives

HMRC expects your report to clearly set out:

• The technological uncertainties you faced.
• Why existing knowledge and methods were insufficient.
• The systematic approach you took to resolve those uncertainties.
• The advance in science or technology you achieved (or attempted).

“Challenging site” or “complex stakeholder environment” is not enough.

3. Overstated Staff Time

Roles like:

• Site managers.
• Project managers.
• Quantity surveyors.

rarely spend large proportions of their time on genuine R&D. Claims that allocate high R&D percentages to these roles are likely to be challenged.

4. Blurring R&D and Production

In construction, R&D often happens within live projects. That’s acceptable — but you must clearly separate:

• The R&D elements (e.g. developing and trialling a novel method), from
• The routine delivery once the method is proven.

Robust time‑recording, cost apportionment, and clear scoping are essential.

5. Lack of Contemporaneous Evidence

HMRC places more weight on evidence created at the time than on retrospective narratives. Useful evidence includes:

• Design calculations and analysis models.
• Site trial records and test reports.
• Technical meeting minutes and risk registers.
• Email correspondence discussing uncertainties and options.

If your claim can’t be backed up with this kind of material, it’s more vulnerable.

How Innovation Plus Works With Construction Businesses

We don’t start from the assumption that every construction project contains R&D — because it doesn’t. Our role is to:

• Give an honest view on whether your work involves genuine technological uncertainty, not just commercial or logistical difficulty.
• Identify the real R&D within your projects — the specific technical challenges that a competent professional couldn’t readily resolve from existing knowledge.
• Separate R&D from routine construction using defensible, practical time‑recording and cost‑apportionment methods.
• Prepare technical narratives that speak HMRC’s language, referencing the DSIT Guidelines and CTA 2009 Part 13, and clearly explaining the uncertainties, advances, and methods.
• Support and defend claims if HMRC opens an enquiry, using technical specialists who understand both the engineering and the tax legislation.

We’ve been preparing R&D claims since 2009. If something doesn’t qualify, we’ll say so — upfront. That may mean a smaller claim, or no claim at all, but it also means you’re not exposed to avoidable enquiries, repayments, and penalties.

Next Step: Get an Honest Assessment

If you:

• Suspect you have genuine innovation buried inside live or completed projects, or
• Have been told “everything is R&D” and you’re now rightly sceptical,

we can help you separate real technological R&D from routine construction and build a claim that stands up to HMRC scrutiny.

Get an honest assessment of your construction R&D →