Research and Development Allowances (RDAs)

Description

The much less well-known capital counterpart to R&D tax relief: a 100% first-year capital allowance for capital expenditure on research and development, so the whole cost comes off taxable profits in the year it's incurred. It matters because it covers things the R&D expenditure credits can't — notably buildings, laboratories and premises used for R&D, which would otherwise attract only the 3% Structures and Buildings Allowance, if anything. HMRC's own Capital Allowances Manual is blunt about it: 'the allowances are very generous because the rate is 100%.' The R&D has to relate to the trade the claimant actually carries on (or one they set up afterwards), and the allowance is available to traders only — someone carrying on a profession or vocation cannot claim. Expenditure on acquiring land (or rights over it), on acquiring rights in or arising out of R&D, and on dwellings is excluded, although the cost of a building or structure already on bought land can qualify once the land element is stripped out. RDAs can be claimed alongside R&D tax relief on the revenue side, so the two are complementary rather than alternatives.

Eligibility summary

• Available across the whole UK (England, Scotland, Wales, and Northern Ireland).
• Applicant must be a registered business.
• Most relevant to: Research & Development, Manufacturing, Technology & Digital.

Notes

Formerly the scientific research allowance, renamed by the Finance Act 2000. A balancing charge arises if an asset representing qualifying expenditure is sold, demolished or destroyed, but not merely because its use changes. Distinct from — and claimable alongside — the R&D expenditure credit and Enhanced R&D Intensive Support, which cover revenue rather than capital spend. Re-verified 25 Oct 2026 against primary sources: HMRC's Capital Allowances Manual CA60100 ('RDA: Outline', updated 8 July 2025: 'The allowances are very generous because the rate is 100%'; 'RDA is only available to traders. A person carrying on a profession or vocation is not entitled to them') and CA60400 (updated 8 July 2025: no allowances for land or rights in or over land; apportion a purchase price to exclude the land); and the Capital Allowances Act 2001, section 439 (R&D must relate to the claimant's trade, or a trade they set up and start afterwards), section 441 (allowance equal to the qualifying expenditure in the period incurred), section 438(2) and (3) (acquisition of rights in or arising out of R&D, and dwellings, excluded), and section 440 (land excluded, with a carve-out for buildings and structures already on the land). Correction: the earlier text said 'the cost of acquiring intellectual property' is excluded; the statute actually excludes rights in or arising out of R&D (not intellectual property generally) and dwellings. No repeal or reform of Part 6 appears on legislation.gov.uk (the only pending change listed concerns an unrelated cross-reference), and secondary coverage of the 26 November 2025 Budget reported no change to R&D allowances. The 3% Structures and Buildings Allowance rate comparison is from gov.uk guidance.

Applicant type

A trader incurring capital expenditure on R&D related to the trade they carry on. Not available to a person carrying on a profession or vocation.

Qualifying expenditure

Capital expenditure on carrying out R&D, or on providing facilities for it, directly undertaken by the claimant or on their behalf, including buildings and premises that wouldn't qualify for other capital allowances. Excluded: land and rights in or over land (though a building or structure already on the land can qualify, with the land cost apportioned out), rights in, or arising out of, research and development themselves, and dwellings (a dwelling forming part of a larger building used for R&D is ignored if it is no more than 25% of the cost of the whole building).