Do R&D tax credits apply to a sole trader?

Research and development (R&D) tax credits can only be claimed by companies that are liable to UK Corporation Tax. Sole traders do not pay UK Corporation Tax and, as a result, they cannot claim R&D tax credits.

R&D tax credits are form of Corporation Tax relief and so — if you’re a sole trader — you’re not registered for UK Corporation Tax and cannot make a claim.

Conditions for claiming R&D tax credits as an SME:

• 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.
• 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.

At ForrestBrown, we specialise in R&D tax credits and advise innovative businesses on their role in the funding cycle.