Research and Development Capital Allowances Explained

Research and Development Capital Allowance (RDA) provides a valuable deduction for capital expenditure on qualifying R&D costs.

What are Research and Development Capital Allowances?

Research and Development Capital Allowance (RDA) is the allowance formerly known as scientific research allowance. RDA provides a valuable deduction for capital expenditure on R&D, on assets used for R&D purposes, or on providing facilities for carrying out R&D. R&D allowances offer a 100% deduction for tax purposes. This is of particular benefit after the removal of IBAs (Industrial Buildings Allowance).

As of the 1st January 2019, you can now claim £1,000,000 in capital allowance rather than £250,000, which it has been previously.

Furthermore Assets purchased for R&D have an additional unlimited annual investment allowance at 100%.

Expenditure on research and development includes expenditure incurred for:

• carrying out research and development

• providing facilities for carrying out research and development

RDA: Qualifying expenditure

Qualifying expenditure is capital expenditure that a company incurs on research and development directly undertaken by the company or on the companies’ behalf provided that:

• the research and development is related to a trade that the trader carries on, or

• the trader sets up and commences a trade connected with the research and development.

RDA is only due if the research and development expenditure is related to the trade being carried on or about to be carried on. Research and development related to a trade includes:

• any research and development which may lead to or facilitate an extension of the trade;

• medical research which has a special relation to the welfare of workers employed in that trade, for example research into an occupational disease.

RDA: Disposal Allowances and charges

The same rules apply for disposal as other assets - i.e. will give rise to a balancing charge or allowance.

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