Can the cost of land be included in an R&D tax relief claim?

As innovative businesses get more ambitious with R&D work, there may come a time when they need to expand the property in order to continue with groundbreaking research.

Accountants who are seeking to support these businesses may indicate the ability to include some indirect costs in an R&D tax relief claim.

However, not every cost incurred to support R&D is valid in an R&D tax relief claim so it is vital to understand where the line is drawn.

Is the cost of land an eligible cost for an R&D tax relief claim?

As much as the land may be purchased with the sole intention of using it for R&D work, the cost of land cannot be included in an R&D tax relief claim.

This is likely due to the complexity around discerning the full plans to use the land and it being almost impossible to guarantee that the land would be exclusively used for R&D purposes.

Instead, innovative businesses should look to incorporate the full range of qualifying costs into an R&D tax relief claim to ensure that they can get the most out of the research that is conducted.

Qualifying costs can include:

• Staff Costs
• R&D Consumables
• Software
• Prototypes
• Subcontractors and Externally Provided Workers (EPWs)
• Research Contributions
• Clinical Trial Volunteer Costs
• Cloud computing and data costs
• Pure Mathematics

While there may be some surprising elements that are often overlooked when calculating the costs for R&D tax relief claims, the cost of land is unfortunately not included.

How is the acquisition of land handled in an R&D tax relief claim?

In short, it is not possible to incorporate any aspect of purchasing land in an R&D tax relief claim.

Unlike the acquisition and utilisation of consumables that can be included in an R&D tax relief claim if they are irreversibly destroyed or changed by the R&D, land acquisition is deemed too commercial to be counted.

It is good that innovative businesses and the accountants that help them are considering a full range of angles to ensure that they get the most out of R&D tax relief claims.

However, this does not mean that ineligible costs should be included, as this will lead to the R&D tax relief claim getting rejected.

It is also important not to include irrelevant activities in the technical narrative, as this can harm the R&D tax relief claim as well.

As R&D tax consultants, we work to support accountants and the innovative businesses they help to know what can and cannot be included in an R&D tax relief claim.

We would always advise seeking professional help and support before considering what to include in an R&D tax relief claim to ensure that it is valid to do so.

Get in touch to ensure that only eligible costs are being included in R&D tax relief claims.

Adam Bointon