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HMRC internal manual

Corporate Intangibles Research and Development Manual

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Intangible assets excluded from Schedule 29 as special tax rules apply: R&D: approach

FA02/SCH29/PARA82

Background

Accounting standards dealing with expenditure on R&D include FRS102 s18, IAS38, FRS105 s13 and SSAP13. The specific requirements of these accounting standards differ but, with the exception of FRS105 s13, all will potentially result in some R&D expenditure being written off as incurred and some being included as an intangible asset (under FRS105 s13, all R&D expenditure is written off as incurred). There is a brief overview of the standards at CIRD99100 and CIRD99200. 

For CT purposes revenue expenditure on R&D will normally be deductible when it is written off in the accounts. And some revenue expenditure will also qualify for R&D tax relief, see:

  • CIRD90000 onwards for research and development tax relief for small or medium sized enterprises,
  • CIRD85000 onwards for research and development tax relief for large companies,
  • CA60000 onwards for the rules allowing a company to deduct capital expenditure on research and development as it is incurred, regardless of the accounting treatment.

 

Effect of provision

Schedule 29 preserves this position by excluding expenditure on research anddevelopment from the provisions in Part 2 of Schedule 29 (CIRD11000 onwards) which are concerned with expenditure written off as incurred and with deductions for sums written off assets.

Receipts from the exploitation of research and development remain within Schedule 29.

Where an asset representing research and development, or their fruits, is realised, deductions for the cost of the asset under Part 4 of Schedule 29 (CIRD13210 onwards) do not include expenditure on that research and development. That is because the expenditure will be deductible under the CT provisions outside Schedule 29.

CIRD25170 lists those computational provisions in Parts 2 to 4of Schedule 29, which continue to apply to assets representing expenditure on research and development.

The definition in ICTA88/S837A of R&D applies, with the inclusion of expenditure on oil and gas exploration and appraisal (see CIRD81900).