Definition
Pre-trading R&D expenditure is qualifying research and development expenditure incurred by a company before it starts to trade. Under section 61 of the Corporation Tax Act 2009, expenditure incurred in the seven years before trade commenced and that would have been deductible had the company then been trading is treated as incurred on the first day of trading. This allows early-stage companies to include historic development costs in their first R&D tax relief claim. The usual qualifying categories and rules apply.
How HMRC defines it
HMRC guidance on pre-trading expenditure in the R&D context is at CIRD81450 of the CIRD Manual and in the Business Income Manual at BIM46351. The statutory treatment is at section 61 of the Corporation Tax Act 2009.
Practical example
A deep-tech start-up spends £400,000 on qualifying R&D in the two years before it begins trading in May 2024. In its first accounting period to 30 April 2025, the company treats the pre-trading expenditure as incurred on 1 May 2024 and includes it in its first R&D claim under the merged scheme.