Example of a Research & Development Allowances project
For this example, a company involved in R&D decides to construct a new £500,000 property on land (which it already owns) to be used solely for the purposes of developing their products.
Under normal rules, Capital Allowances would not be available on the bulk of the construction costs of the property.
With RDAs, as the property is solely used for the purposes of R&D, all of the £500,000 cost would be qualifying expenditure, meaning the company could claim a £500,000 deduction in their Corporation Tax computation. This would create a tax saving of £95,000 not available through Capital Allowances.
If the factory constructed was used for mixed purposes, for example, half used for R&D and the other half used for non-qualifying R&D activities, an adjustment would have to be made to reflect the qualifying area of the property.