Quick answer: Capital expenditure on R&D is spend on assets used in qualifying research, such as laboratory equipment or specialised software with enduring benefit. It does not qualify for the revenue R&D tax credit, but qualifying R&D capital spend attracts a 100% first-year Research and Development Allowance instead.
What is capital expenditure for R&D purposes?
Capital expenditure on research and development refers to spend on tangible or intangible assets used for qualifying R&D activity, such as laboratory equipment, pilot plant, or specialised software licences with enduring benefit. Such expenditure does not qualify for revenue R&D tax credits, which are limited to deductible revenue costs. Instead, qualifying R&D capital spend attracts a 100% first-year Research and Development Allowance under the Capital Allowances Act 2001.
How does HMRC treat R&D capital expenditure?
HMRC guidance on Research and Development Allowances is at CA60000 in the Capital Allowances manual, with CIRD81810 confirming the exclusion of capital items from the revenue R&D claim. The 100% first-year allowance for R&D capital expenditure is set out in Part 6 of the Capital Allowances Act 2001.
What does R&D capital expenditure look like in practice?
A biotechnology company spends £350,000 on a specialised cell-culture bioreactor used exclusively for a qualifying research project. The cost is excluded from the revenue R&D tax credit claim, since it is capital in nature. The same £350,000 is claimed in full as a Research and Development Allowance in the year of acquisition, producing an immediate deduction against taxable profit.
Related terms
Frequently asked questions
It is spend on tangible or intangible assets used for qualifying R&D activity, such as laboratory equipment, pilot plant, or specialised software licences with enduring benefit.
No. Capital items are excluded from the revenue R&D claim. Instead, qualifying R&D capital spend attracts a separate 100% first-year Research and Development Allowance under the Capital Allowances Act 2001.
Typical examples are laboratory equipment, pilot plant, or specialised software licences with enduring benefit that are used for a qualifying R&D project.