If you’re an innovative business that’s investing in R&D, you can maximise your profits and minimise your taxes with research and development allowances (RDA).
Research and development allowances (RDA) are a type of capital allowance that supports innovative businesses with a 100% first-year tax deduction against your annual profits for capital expenditure on R&D.
Like R&D Tax Relief, this allows you free up cash flow for reinvestment in growth and development for your business.
For accounting purposes, R&D typically refers to a project or projects that have looked for an advance in science and technology as well as faced uncertainty during the work. You’ll need to demonstrate either how you’ve overcome the uncertainty or that you’ve at least tried to overcome the uncertainty. The solution must be complex (i.e., a professional in the field can’t easily work out your innovation).
For claiming RDA, the definition of research and development also includes the costs of oil and gas exploration and appraisal.
Research and development allowances are only available for traders (and not for people carrying out professions or vocations). The trader’s work must also directly link to the R&D.
HMRC defines a trade as a commercial operation where the trader sells goods or services to customers.
Qualifying expenditure for RDA includes:
• carrying out R&D
• providing R&D facilities (e.g., a laboratory or other research sites)
• providing assets that employees use for R&D (e.g., a car that staff use to travel between R&D facilities)
So if your company invests in research and development, whether it’s developing new/improving existing technologies, creating facilities for carrying out R&D, or providing assets to enable R&D, the amount spent on such capital assets can be written off in full against the company’s profits in the first year. The acquisition of patents/rights for the R&D does not count as qualifying expenditure.
The rate for research and development allowances is 100%! The allowance can only be claimed for the year that you incurred the spend.
Do you have any historic, recent or planned building or industrial and engineering plant related capital spend for your business, which may fall under any of the following categories?
· Refurbishment works
· New construction works
· Fit out works
· Acquisition of buildings
We can provide a whole development lifecycle advice, aimed at identifying valuable capital expenditure tax relief from the planning stage, to construction, occupation and subsequent sale or acquisition.