Research and development (R&D) tax credits can only be claimed by companies which 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 are a sole trader you are not registered for UK Corporation Tax, therefore you cannot make a claim.
Conditions for claiming as an SME:
- Company is a going concern.
- Company is within the charge 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. For advice on R&D tax credits and their relationship with other forms of funding, speak to our friendly team of chartered tax advisers, technical specialists and ex-HMRC inspectors today.