The past year has been a great challenge for most businesses, particularly, for those who are involved in the construction and engineering industry. Although, it has a slight edge over hospitality or retail industry yet based on one report, it is estimated that the UK’s construction industry has suffered a loss of more than £300M a day when the Coronavirus has started to emerge in April 2020.
Fortunately, these challenges brought about by the pandemic has been compensated by Brexit and the latest launching of two controversial tax policies which are the reverse VAT charge and IR35.
Due to the current situation, businesses are now under pressure since margins are getting too tight. Discussions about recovery and future plans are essential. Hence, it’s about time that businesses should take into account their perceptions about innovation, investment and digital approaches if they want to survive.
Be Adaptable to Change
Generally, the construction industry is quite slower when it comes to adapting the digital transformation. However, due to Covid-19, a lot of businesses have started to enjoy the benefits of this technological change.
It is a fact that digitalisation requires an enormous investment of time and money. That is why, businesses have to think about the uncertainties that the industry might be facing as well as the benefits of using digital approaches. Most of all, the possible consequences if they do not act right away.
It is a huge decision to make, however, now is the best time to think about the future. Some businesses might be able to recover their investment in a short period of time while for others it might take years. Let’s not forget that several businesses have been adapting digitalisation even before the start of Covid-19. While other businesses have started to catch up.
Some businesses are having a hard time to decide whether or not they should embrace change. However, this should not be the case.
The good news is the R&D tax relief incentive offered by the government acknowledges investment intended for innovation. This could greatly help businesses in adapting to technological change. At the same time, the reverse VAT charge and IR35 could ease out their financial burden.
As the R&D tax relief awareness has continued to spread, more and more businesses must be able to understand what the incentive is trying to accomplish and how these businesses can become a part of it. For instance, when investing into digitalisation, businesses should be aware that it can help in enhancing their opportunities for R&D tax relief after they were able to accomplish digital transformation.
In this way, the incentive can be used effectively such as investing in innovation which businesses require for their recovery.
IR35 has the tendency to discourage contract labour, nevertheless, R&D could provide assistance indirectly. Although the government has recommended that businesses could make use of these workers, yet these contract workers have made it possible for businesses to change their labour capacities to satisfy the demand for their projects. This is very important for businesses as the margins have continue to tighten.
Normally, the typical construction workforce spends most of their on-site. But ever since the advanced methods of construction was introduced, there is now a lesser need for this. This is because they spent most of their time in highly-skilled design technology and fabrication processes, making this a concrete R&D opportunity.
Not all businesses are hesitant to change. We have seen different types of businesses within the industry. First of all, there are large contractors and digitised consulting firms that have claimed and used their R&D tax relief. Alternatively, there are also traditional contactors who are afraid of taking risks and need more time to re-evaluate R&D and digitalisation.
It would be easy for businesses to ignore R&D tax relief right now. However, just like digital transformation, it is important that you should consider this incentive as investment to fund your business in the future. You may decide not to include this in your business strategy, yet most of your competitors have already been using them.
Right now, the industry is facing enormous pressure. At the same time, the reverse VAT charge and IR35 were introduced during these worst times.
Nevertheless, construction companies are now given the chance to plan for their future. Consequently, R&D tax relief could provide them with sufficient funding should they choose to adapt to digital transformation.
Although it is true that there is uncertainty in the future, yet one thing is clear. Businesses must be flexible and strategic if they want to overcome the challenges ahead.