765 Allowances for capital expenditure on scientific research

Summary

This section gives an allowance in respect of capital expenditure on scientific research incurred by a person carrying on a trade to which the expenditure relates. An allowance is also available where the capital expenditure on scientific research is incurred by a person carrying on a trade but the expenditure is not related to the person’s trade.

Details

Research related to a trade

(1) A person carrying on a trade is entitled, in computing the profits or gains of the trade, to an allowance representing capital expenditure on scientific research other than capital expenditure on a building or structure except where the construction or development is itself scientific research relating to the trade. The allowance is also available where the person has incurred the expenditure before the start of trading. A claim must be made within 2 years of the end of the chargeable period in which the expenditure was incurred or, where the expenditure was incurred before the trade was set up, within 2 years of the end of the chargeable period in which the trade was set up. Any asset which represents the capital expenditure must be in use for the purposes of scientific research at the end of that chargeable period.

Research not related to a trade

(2) An allowance can also be claimed in respect of capital expenditure incurred by a person carrying on a trade on scientific research which is not related to any trade carried on by the claimant.

Asset no longer used for research

(3) Where an asset representing capital expenditure on scientific research ceases to be used for the research relating to the trade of the person who incurred the expenditure, the trader must include as a trading receipt an amount representing the lower of the amount of the allowance granted or the value of the asset at the time it ceases to be used.

Bar on double allowances, etc

(4) Where in a chargeable period an allowance is made for capital expenditure on scientific research and that expenditure is represented by an asset, no wear and tear allowances are to be made in in respect of the expenditure on the asset. Likewise, where the asset is an industrial premises, no deduction based on the rateable valuation of the premises is to be made in the period in ascertaining trading profits.

Carry forward of allowance

(5) Unused allowances in respect of capital expenditure on scientific research may be carried forward against future trading income.

Relevant Date: Finance Act 2021