Make sure that you are being rewarded for the capital that you invest in innovation. RDAs offer R&D tax relief for businesses incurring qualifying capital expenditure relating to the R&D activities. In addition, the super-deduction was announced by the government in the 2021 Budget to encourage companies to make capital investments in plant and machinery. Clients should discuss the pros and cons of each scheme with their accountant to make sure that they optimise the tax benefit for their business. This was in place for expenditure incurred from 1 April 2021 until 31 March 2023.
If you are spending on capital assets that are used for R&D activities you could receive 100% year 1 tax relief. There is no limit to the amount you can claim, unlike the annual investment allowance.
The RDA is available on qualifying capital expenditure that was used to carry out qualifying R&D activities.
It’s not possible to make a claim for RDAs unless it is supported by a valid R&D tax relief claim report that details the qualifying activities and any RDA qualifying costs.
Costs associated with the structure and fabric of the building are not qualifying for a normal capital allowances or AIA claim and therefore can only ever be claimed as RDA. If you have spent money on the fabric of the building where you have carried out qualifying R&D activity then you should certainly speak to one of our specialists.
Spending on the following is allowable under RDAs:
R&D facilities (such as buildings) or on refurbishing a development facility. These capital assets do not qualify within the capital allowance legislation, but you can claim under the RDA legislation
If an R&D centre forms part of a larger facility – and if the centre accounts for at least 75% of the overall cost of the facility – then R&D RDAs can apply to the entire facility
Laboratory equipment used to carry out qualifying R&D activities
Plant and machinery used to carry out qualifying R&D activities
Company cars for R&D staff
Our one and only goal is to get you the maximum benefit you deserve for innovating in the UK. We have access to a full range of industry experts across the country – with different experience, skillsets and technical knowledge. Your technical specialist will start with visits to your site, or sites, to walk the floors and understand your business. That’s how we identify your R&D activity, and how we can start to identify any capital expenditure associated with that activity.
We have a holistic approach rather than focussing solely on the R&D tax relief scheme. For us this isn’t just a simple transaction or box ticking exercise, by building our relationship we are able to identify more of your R&D, and bring more tax benefits to the table.
The annual investment allowance gives 100% tax relief on qualifying capital expenditure incurred in the relevant period. This is currently £1m for any expenditure after 1 January 2019.
If your capital expenditure is linked to R&D activity but is more than the current £1m AIA, or if you are part of a group, that has exceeded £1m then you could potentially claim under the RDA scheme. The AIA is shared between all companies within a group. If one claims the £1m then there’s no allowance left for the others. All too often the group members themselves don’t know who is claiming or can claim.
There is no limit as to the amount you can claim under the RDA scheme.
However, if you have capital expenditure that sits in both qualifying and non-qualifying R&D activity, or your total spend is over £1m you should find out how to maximise the value of your capital allowances using both tax levers. GovGrant will be able to discuss your options and will only suggest applying for RDA if it makes sense for your business.
You will need to provide evidence to show:
However the costs don’t have to be project specific.
As with any capital allowance claim, an RDA must be claimed within 2 years.
There is no claw back of the tax relief if the company stops using the equipment for R&D purposes, whether that is during the period or after.
For every £100 spent on eligible capital costs the company can get the additional benefit of up to £19 immediately. Rather than being too late to make a claim or having to wait up to 20 years to get the full tax relief.
The super-deduction was announced by the government in the 2021 budget to encourage companies to make capital investments in plant and machinery. The super-deduction enables a company to claim the (super) deduction in their tax computation of 130% of the qualifying expenditure incurred on plant or machinery during accounting periods 1 April 2021 to 31 March 2023.
For example, if you purchased a qualifying piece of plant and machinery for £10,000 you could claim a deduction for £13,000 in your tax computation.
The super-deduction only applies to capital expenditure on tangible fixed assets, which are outside of scope of your R&D claim and therefore does not impact the R&D claim in anyway.
The super-deduction only applies to main rate plant and machinery capital expenditure incurred during periods 1 April 2021 to 31 March 2023.
RDAs are available on all qualifying capital expenditure, including some costs which wouldn’t usually qualify under either the super-deduction or general capital allowances, such as bricks and mortar and the construction fabric of a building. RDAs are only qualifying when the capital item(s) have been used as part of the R&D projects and supported by a technical report; evidencing their compliance and use in the qualifying R&D activities.
The super-deduction rate is 130% of qualifying main rate plant and machinery capital expenditure incurred during periods 1 April 2021 to 31 March 2023. The RDA rate is 100% of the qualifying expenditure on capital items that were used as part of the qualifying R&D activities.
Unless you have non-main rate expenditure or capital costs that wouldn’t usually qualify for allowances such as bricks and mortar or the fabric of the building then the super-deduction will be more beneficial to you whilst available. For more information on the super-deduction and how it relates to your business we would recommend speaking to your accountant.
RDAs are closely linked to R&D tax relief and a company can often claim tax relief under both schemes. GovGrant can offer you advice to maximise your claims across both schemes.
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