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  3. Can a company limited by guarantee make an R&D tax credit claim?

Can a company limited by guarantee make an R&D tax credit claim?

A company limited by guarantee can make an R&D claim provided it meets the normal eligibility criteria.

A company limited by guarantee is a company which does not have a share capital, so it has members instead of shareholders. The liability of its members is limited to the amount the members contribute to the assets of the company. Companies limited by guarantee are often not-for-profit organisations, where any profits are reinvested back into the business rather than being distributed to the members.

R&D tax credits are Corporation Tax relief, and in principle are available to any company within the charge to UK Corporation Tax. In other words, they are available to a company limited by guarantee in the same way as to a company limited by share capital.

There are a number of eligibility criteria, which apply equally to companies of both types. The conditions for claiming R&D tax credits as an SME are:

  • Company is a going concern.
  • Company is subject to UK Corporation Tax.
  • Company meets the SME thresholds for headcount and turnover or balance sheet assets.
  • The company carries out a trade or future trade to which the R&D activities relate – this is of particular relevance here, as not all guarantee companies will have a trade or be preparing to carry on one.
  • The R&D activities claimed have not been contracted to the company.
  • Expenditure is deductible for Corporation Tax purposes in the claim period.
  • No grants or subsidies have been received in respect of the expenditure.
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