Corporation Tax

Research and development tax relief ― capital expenditure

Produced by Tolley
  • 21 Jun 2022 09:12

The following Corporation Tax guidance note Produced by Tolley provides comprehensive and up to date tax information covering:

  • Research and development tax relief ― capital expenditure
  • Relief for capital expenditure
  • What is qualifying expenditure for RDAs?
  • How is relief given on qualifying capital expenditure?
  • Disposal events and values for RDA purposes

Research and development tax relief ― capital expenditure

Relief for research and development expenditure differs depending upon whether the expenditure is capital or revenue in nature (see the Capital vs revenue expenditure guidance note). Relief for revenue expenditure also differs depending upon whether the company qualifies as an SME or not. The available reliefs can be summarised as follows:

  1. R&D allowances (RDA) which allow full relief for qualifying capital expenditure in the year that it is incurred

  2. R&D tax reliefs which allow relief for qualifying revenue expenditure

It is important to note that R&D tax relief for revenue expenditure is not available to unincorporated businesses or individual hobbyist inventors ― only to companies. The RDAs for capital expenditure are available for companies and unincorporated businesses, provided they are carrying on a trade.

This note discusses the relief available for capital expenditure. For the relief available for qualifying revenue expenditure, see the Research and development (R&D) expenditure ― overview guidance note.

See also Simon’s Taxes B3.7 for further details.

Relief for capital expenditure

What is qualifying expenditure for RDAs?

R&D for these purposes is defined as activities that fall to be treated as such in accordance with GAAP and that satisfy the conditions set out in the guidelines issued by the Department of Trade and Industry (DTI). Essentially, R&D that qualifies for the tax relief for revenue expenditure will also be R&D for capital allowances purposes (see the Definition of research and development guidance note for further details). In

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