R&D in the construction industry

Imagine a skyline dotted with innovative structures, each a testament to the cutting-edge research and development that brought them to life. In the construction industry, the collaboration between companies and contractors is not just about building; it's about pioneering new technologies and sustainable solutions, writes Seamus Leahy, in our R&D Incentives practice.

It’s often easy to appreciate the gravity of large construction projects because we can see the size and complexity. Indeed, most metropolitan and industrial zones are peppered with new large-scale construction, evident by a skyline of tower cranes.

These complex site operations require construction and engineering companies to be skilled project managers, completing impressive and complex projects around Ireland. However, completing these projects is more than just good project management, and increasingly involves RD&I.

Consider some high-profile international projects such as the Burj Khalifa in Dubai, where innovative construction techniques and materials were developed to achieve unprecedented heights. Similarly, the Crossrail project in London showcases how advanced tunnelling methods and collaborative R&D efforts can revolutionise urban transportation.

Seamus Leahy

Associate Director

KPMG in Ireland

mail
call

A pathway to overcoming challenges

The Irish R&D tax credit legislation defines qualifying R&D activities as those which are systematic, investigative or experimental, seek to achieve new knowledge and involve the resolution of technological challenges. These activities can include the improvement of existing products, processes or services, as well as devising new ones, and crucially, R&D is often a pathway to overcome engineering challenges faced in construction projects.

One real Irish example showcasing the collaborative nature of construction R&D projects is the development of the Central Bank of Ireland's new headquarters in Dublin's docklands, completed in 2017. This iconic office block stands as a testament to the innovative solutions achieved through collaborative efforts in the construction sector. The project involved a blend of cutting-edge design techniques and sustainable construction methods, highlighting the crucial role of research and development in shaping the future of the industry.

Looking ahead, the construction industry is poised to embrace new technologies. These innovations promise to further enhance the efficiency and sustainability of construction projects, making RD&I more crucial than ever.

Seamus Leahy

Associate Director

KPMG in Ireland

Embracing new technologies

Large construction projects are multifaceted endeavours consisting of complex civil and materials design and engineering, often intertwined with routine building techniques. Such projects regularly involve significant R&D. Within this type of project, it is often the case that the large construction companies have a holistic vision of what the innovative project will be, while the contractor/service provider will offer their contribution to shape that vision.

In either case, it is possible they both innovate and can therefore both carry out qualifying R&D activity. Looking ahead, the construction industry is poised to embrace new technologies such as 3D printing, modular construction, and smart materials. These innovations promise to further enhance the efficiency and sustainability of construction projects, making RD&I more crucial than ever.

And in driving innovation and new technologies, both contractors and service providers stand to benefit from qualifying R&D activities. However, it is important that a thorough technical analysis is performed in order to assess this in the first instance

Furthermore, expenditure incurred on large items of plant and machinery which may be used to carry out R&D activities can also qualify for the R&D tax credit. This is often regarded as an important aspect of Ireland’s R&D tax credit regime as R&D incentives in other jurisdictions don’t provide for R&D credits on capital expenditure.

Grant aid

In addition to the R&D tax credits scheme is the availability of grants to support projects. Both the IDA and Enterprise Ireland offer grants including those for RD&I, Capital, Training, Environmental and Employment. It is important to note that any relevant R&D expenditure which is supported by grant aid must net out the grant amount received in the relevant period in the case where an R&D tax credit claim is also being made. The R&D tax credit is available on the portion of expenditure not supported by grant aid.

A significant amount of assistance is available to companies when the reduction available on any trading costs - which is at a rate in line with the corporation tax rate of 12.5% - is considered. Layering on top of this any applicable grants which you may receive -potentially at rates of 10 -15% - and the R&D tax credit rate of 30%, a very attractive package can be put together for suitable R&D projects with total assistance in the range of 55-60% of relevant costs.

Driving a sustainable and innovative future

In conclusion, the symbiotic relationship between construction companies and contractors is a fertile ground for RD&I. By investing in research and development, companies are not only overcoming engineering challenges but also driving the industry towards a more sustainable and innovative future.

If you are one of these contractors or service providers developing innovative, bespoke solutions as part of a larger project, it would be worth carefully considering your activities to determine if they could qualify for the R&D tax credit.

Get in touch

If you have any questions or would like to discuss qualifying for R&D tax credits, contact Seamus Leahy in our R&D Incentives Practice. We would be delighted to hear from you.