Updated: Jul 5, 2020
HM Revenue & Customs ("HMRC") is investigating capital allowances claims for entire R&D facilities where there is an element of mixed use when the original claim was made. If your business has made such a claim and the claim was not calculated correctly you may be at risk of an unsuspecting clawback of allowances with interest and penalties.
We understand that HMRC believes R&D claims are being incorrectly made for entire facilities where the qualifying use accounts for at least 75% of the overall cost of the facility. Only in limited circumstances will this be possible.
Capital Allowances Act (“CAA”) 2001 s438(4) is a deeming provision that deals specifically with the situation where part of a qualifying R&D building is a dwelling. If no more than 25% of the capital expenditure is towards the construction or acquisition of the dwelling and the rest of the building is used for R&D, the whole building is deemed to be used for R&D.
There are no equivalent deeming provisions for mixed commercial developments. If a building was to be used partly for R&D and partly for other commercial purposes (e.g. sales, business administration etc.), there would be nothing to deem the whole building to be used for R&D. In this situation it is necessary to apportion/assess the costs and to restrict the RDA claim to the R&D related portion which was covered in an earlier article here.
If you are concerned about how your R&D claim has been calculated or, would simply like to discuss how best to correctly optimise this valuable relief, please do not hesitate to contact us directly.