R&D Capital Allowances(RDAs)
RDA’s (or ‘claiming R&D Capital Allowances’) were introduced in the UK in 2001 – they allow an individual, partnership or limited company to write down almost all the R&D expenditure that it has capitalised, for tax purpose, and thereby reduces the amount of tax that is paid and, consequently, cash is retained within the business.
RDA’s offer a generous 100% first year tax relief and can be claimed on most capitalised expenditure that has been directly incurred when carrying out or provisioning facilities to undertake R&D; but note that you can’t claim for the cost of any land that has been purchased for this purpose or for the cost of any intellectual property. You can also retrospectively claim RDA’s for up to 2 years after the end of an accounting period and you can claim in part for facilities that are partly for R&D and partly for other purposes e.g. day-to-day manufacturing or support (but can in fact claim for all if the R&D part is at least 75% of the total).
There is no cap on the amount that can be claimed under RDA’s and these can be claimed in addition to the Annual Investment Allowance (AIA), which is currently capped at £200k per annum; so, the more you spend, the more you get the 100% relief on! You can’t cash-in RDA’s but can utilise them in one of the following ways:
- reduce the amount of Corporation Tax due (and reclaim any tax that you’ve overpaid in the past two years, because of not claiming)
- group relieve it (if you are part of a group for tax purposes, can off-set taxable losses against taxable profits elsewhere in the group)
- carry-forward, as a trading loss, to off-set against future years’ profits and thereby reduce any Corporation Tax then due
Who can claim?
Generally, the 100% deduction for RDA’s apply to the building, extending or refurbishing of R&D facilities – where the expenditure has been capitalised. UK companies, individuals and partnerships can claim RDA’s, unlike R&D Tax Credits – which is restricted to Limited companies.
- Built or refurbished R&D facilities
- Laboratory equipment
- Company cars for R&D staff
- Investment in plant and machinery, or fixtures and fittings to support R&D work
RDA’s operate quite separately to claiming R&D Tax Credits (and you can claim either or both); the definition of R&D is though the same for both, but you need to be trading to claim RDA’s (and they aren’t available to those carrying out a profession or vocation); like R&D Tax Credits around only 20% of companies that could claim RDA’s have done so to present.
R&D Tax Credits relate to expenditure incurred through the operational cost of the R&D work, i.e. labour and materials (consumed within the R&D). However, RDA’s can be claimed for any capital expenditure incurred for the purposes of the R&D, excluding the cost of land. Both R&D Tax Credits and RDA’s can be claimed simultaneously, and often, companies who qualify for R&D Tax Credits will qualify for RDA’s.
As specialists, our knowledge and expertise mean that you can be sure you are maximising your R&D Capital Allowances Claim, and only claiming what is expected from HMRC. We complete the necessary documentation, saving you valuable time and reducing the chances of errors. Due to our strong and well established relationship with HMRC, we ensure that your claim is settled promptly.
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