Business Situation

A commercial property acquisition can create several potential tax-relief opportunities. Capital Allowances should be reviewed to identify qualifying plant, machinery, fixtures and integral features included within the property. The previous owner's treatment of fixtures and any section 198 election can be particularly important. If the site contains qualifying contamination or dereliction and you incur remediation expenditure, Land Remediation Relief may also be available. Where part of the property will be used for qualifying R&D, R&D Allowances may be relevant to subsequent capital expenditure. The best time to consider these issues is before completing the acquisition, but a post-acquisition review may still identify opportunities.

A new manufacturing facility can potentially involve several forms of support. Capital Allowances may provide relief for qualifying plant, machinery, fixtures and building systems, while R&D Allowances may apply to qualifying capital expenditure incurred on carrying out R&D or providing facilities for it.

If the site requires qualifying remediation, Land Remediation Relief should also be considered. Innovative manufacturing processes or technology development may generate R&D tax relief, while grant funding may be available for innovation, capital investment, energy efficiency or decarbonisation.

Energy-intensive manufacturers should also consider Climate Change Agreement, Energy Intensive Industries and British Industry Supercharger eligibility where relevant. The British Industrial Competitiveness Scheme may also be relevant in some circumstances, but it is a separate support arrangement with separate eligibility and timing rules.

Reviewing the project before contracts are signed or expenditure is committed can help ensure that the available incentives and funding opportunities are considered together.

A patented product can potentially create opportunities at several stages of its development and commercialisation. R&D tax relief may be available for qualifying development expenditure, while Patent Box can potentially reduce the Corporation Tax rate on qualifying profits associated with the patented technology. Grant funding may support further development, demonstration or commercialisation, and R&D Allowances or other Capital Allowances may be relevant where capital investment is required. The business should also consider its wider IP strategy, including patent ownership, protection in relevant markets and opportunities to license or otherwise commercialise the technology. Looking at these areas together can help the business support both the cost of innovation and the value subsequently created from it.

An acquisition provides a good opportunity to review the target company's existing and potential innovation incentives. This should include its approach to R&D tax relief, Patent Box, Capital Allowances, R&D Allowances, grants and intellectual property. Property assets may contain previously unidentified capital allowances, while patents or other IP could create Patent Box or commercialisation opportunities. International acquisitions can also introduce transfer pricing and international incentive considerations. It is also worth reviewing existing adviser contracts, historic claims, HMRC correspondence and the quality of supporting evidence. The objective is both to identify unrealised opportunities and understand any tax or compliance risks inherited through the acquisition.

A significant production-line investment can potentially benefit from several reliefs. Capital Allowances should be considered for qualifying machinery, equipment, fixtures and associated systems, potentially using Full Expensing, the Annual Investment Allowance or another available allowance.

If part of the production line will be used specifically for carrying out qualifying R&D or providing facilities for that R&D, R&D Allowances may be relevant to the qualifying proportion of the capital expenditure. Ordinary commercial production use does not, by itself, make the expenditure eligible for R&D Allowances.

Where the project involves genuine technological development or uncertainty, associated revenue expenditure may also qualify for R&D tax relief. Grant funding may be available for innovative, productivity-enhancing, energy-efficient or lower-carbon investment, while energy-intensive manufacturers should consider whether the project affects eligibility for wider energy relief and support schemes.

A £5 million project should ideally be reviewed before contracts are finalised so that the capital allowances, R&D, funding and energy-support position can be assessed together.