Research & Development Allowances – Case Study
Further to our previous article outlining the mechanics of the often-missed Research & Development Allowances (“RDAs”) this case study shows the relief in action, uplifting the capital allowances claim for a local manufacturer.
Background
YesTax were engaged to provide advice in relation to R&D Tax Credit claims, for a local business who designs and manufactures industrial machinery for production lines, for customers across the UK and internationally. The company undertakes Research & Development as part of the design of their products, specifically engineered to meet the specific requirements of the customers.
The company had recently spent c.£330k constructing a new industrial building on their site, extending their manufacturing and prototyping space. c.£32k of Assets eligible for the Annual Investment Allowances, had already been identified for claim
The opportunity
Working alongside the client’s accountant, YesTax identified an opportunity to claim Research & Development Allowances on the capital expenditure incurred on the construction of this building. Through our work we assessed the extent to which the building was used for qualifying R&D activities, building on the analysis already performed as part of the R&D Tax Credit claim.
Our analysis identified that significant structural spend qualified for Research & Development Allowances, offering 100% deductions in the year the spend was incurred, resulting in a further £125k of first year allowances, equivalent to an additional tax saving of £24k.
Could your capital spend be eligible?
To clarify, Research & Development Allowances (RDAs) is a type of Capital Allowance, independent of the R&D Tax Credit claims already undertaken by the client in this example. R&D Tax Credit claims include revenue expenditure items only. RDAs assess capital expenditure. RDAs are relevant for expenditure on any new facilities to be used for R&D. As part of any capital allowances review by YesTax, RDAs is considered as standard, simply because we are specialist in both areas of taxation, and so it’s due practice for all of our clients.
If you currently make R&D claims and have incurred capital expenditure on your facilities or equipment (or plan to in the future), you may be entitled to RDAs on that expenditure. The time limit for RDAs is 2 years from the end of the accounting period in which the spend was incurred.
For a free consultation get in touch with YesTax’s Head of Capital Allowances, Cal Byers.
YesTax. Positively Better.