100% RDAs; Don’t miss out!
100% R&D Capital Allowances (RDAs) Don’t Miss Out!
Research and development capital allowances (RDAs), are an often overlooked but, valuable element of a R&D tax claim allowing you to claim 100% tax relief on qualifying capital expenditure related to your Company’s R&D activities. RDAs are the capital expenditure equivalent to the R&D tax relief scheme.
RDAs rely on the same DSIT guidance as R&D tax credits but importantly the relief affords a 100% tax deduction on otherwise non-qualifying capital expenditure attracting zero or low rates of tax relief such as buildings or premises costs (not land) and unlike other capital allowances there is no limit. RDAs include the purchase, construction or extension of property. If the R&D centre is more than 75% of the cost of the entire property, the capital allowances apply to the entire facility. Buying an industrial unit or laboratory can involve a significant outlay and the tax relief can also be significant. Furthermore, expenditure on company cars used for R&D can be included in an RDA claim. Not to be missed!
HMRC internal manual gives two examples where expenditure on facilities or assets used by employees carrying on research and development qualify for RDAs:
Example:
The Masters of Invention buy a laboratory in which they plan to carry on research and development. Their expenditure on buying the laboratory, but not the land on which it stands, is expenditure on research and development because it is expenditure incurred on providing facilities for research and development.
Example:
The Masters of Invention provide a car for their employee, Michael, which he uses to travel round between their research sites to check the research work being carried out. The cost of the car is expenditure on research and development.
RDAs offer a valuable opportunity to claim 100% of the capital expenditure related to R&D tax activities. This is especially important to companies who have bought or developed property for use in the R&D. ThirdRock is a specialised tax agent available to advise Companies on all areas of R&D tax relief.
Chris Williams ATT (Fellow)