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COVID 19: Capital Allowances and R&D

Capital Allowances and R&D

Friday, 24th July 2020

Has your business implemented the required safety measures to enable employees to return to work?

Have you had to make major improvements and renovations to welcome more customers through the doors?

Perhaps you have diversified or adapted your existing trade to cater for the wider community?

If you can answer YES to at least 1 of these questions, then you could be in line for some significant tax savings!

How?

Each of the above will enable your business to make the appropriate claims for the additional expenditure incurred.

Capital or Expenditure?

In most cases you will be able to claim 100% of the costs incurred in getting your business back up and running and these costs will usually be covered as general trade expenditure.

Examples of general trade expenditure could be:

  • disposable or reusable PPE,
  • sanitisers,
  • hazard signage or
  • moveable screens.

Examples of capital expenditure could be:

  • new office furniture to enable distance between staff,
  • building work to convert storage into useable office or customer areas,
  • new windows to enable better ventilation or
  • new cleaning and other ventilation equipment

There are numerous other ways that your business may have incurred expenditure that you would not have normally had if it were not for COVID-19. Not sure if you would qualify then call us now!

In some circumstances it may be more tax efficient to treat the expenditure as capital. This will depend on the type of expenditure, how it will be used in the future and their useful life as a business asset.

There are different capital allowance rates depending on the type of purchase. The capital allowances available are mainly:

  • Annual Investment Allowance
  • Enhanced capital allowances
  • Plant and Machinery
  • Business Cars

Each type of allowance carries certain restrictions which outline when they can be used and if the type of expenditure qualifies.

Our team of advisors have the expertise to analyse the costs that you have suffered in getting your business COVID-Safe and are able to explain and advise on the most beneficial reporting method.

Research and Development Allowance (RDA)

RDA has tighter controls and restrictions. If you have diversified your current business, already have or are considering a new trade which will involve additional costs then your business could qualify for the Research and Development Allowance.

Research and the implementation of it will qualify along with development of prototypes and samples.

Perhaps you had to incur additional costs in bringing your premises up to standard to enable your new trade to comply, or a member of staff who was solely employed for R&D purposes required a vehicle. All of this could qualify.

Qualifying expenditure must relate to your trade whether that is your existing trade or a trade that you are going to commence.

The RDA rate is currently 100% of the qualifying expenditure.

The whole 100% does not need to be claimed, however if a reduced amount is claimed then the balance cannot be reclaimed later. Consideration must also be made where a disposal of any qualifying expenditure takes place if the disposal value is less that the unclaimed RDA.

Do you think that your business could benefit from an R&D Review?

At Onyx we have an excellent business partnership with a qualified team of tax experts who are on hand to review any potential claims for R&D qualifying expenditure. Call us now to find out more.

GET IN TOUCH WITH ONYX

Need help with  Capital Allowances or think you could benefit from an R&D Review?

Contact us now or e-mail us at  enquiries@onyxaccountants.co.uk for a FREE no obligation consultation.

Got any questions or queries? Our friendly team of tax specialists are happy to help. Just drop us a line! Call us on 0121 753 5522 or 01902 759 800.

Keep up to date with the latest announcements by visiting our dedicated page https://onyx.accountants/covid/