R&D capital allowances from HMRC
What are Research and Development Allowances (RDAs)?
The government is keen to incentivise those organisations that pursue a sustainable agenda and those that have a focus on research and development. And the tax system reflects this.
Make sure that you are being rewarded for the capital that you invest in innovation. RDAs offer R&D tax relief for businesses incurring capital expenditure on qualifying R&D activities.
Research and Development Allowances – maximising your investment
Research and Development Allowances, also known as RDAs, are a tax relief for businesses incurring capital expenditure on qualifying R&D activities.
If you are spending on capital assets that are used for R&D activities you could receive 100% tax relief. There is no limit to the amount you can claim, unlike the annual investment allowance.
Spending on the following is always 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
Plant and machinery used in the R&D process, i.e. for testing
Company cars for R&D staff
GovGrant – best placed to make an RDA claim
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 the things you do and the things you make. 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.
Consider RDAs after you use your annual investment allowance (AIA)
The annual investment allowance gives 100% tax relief on qualifying capital expenditure incurred in the relevant period. This is currently £1m for the period 1 January 2019 to 31 December 2021, and £200,000 for any period before or after those dates.
If your capital expenditure is linked to R&D activity but is more than the current £1m AIA, or you can’t claim under AIA because of the ‘connected company’ rule then you could potentially claim under the RDA scheme. 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.
- Claiming RDAs can be straightforward
- There is no upper limit on the amount which can be claimed
- 100% tax relief on qualifying spend
You will need to provide evidence to show:
- The company is undertaking a qualifying R&D activity
- The costs must be capital in nature and qualify under GAAP
- The costs must be incurred in the relevant period
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 more than 20 years to get the full tax relief.
Ensure your business recognises and receives the full credit it is due with GovGrant’s R&D tax relief services
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.