Not in its own right. A partnership is not a company for corporation tax, so it cannot hold an R&D claim, and an ordinary partnership of individuals has no route to the relief at all because its members pay income tax. The position changes where a member is a company within the charge to corporation tax. Relief can then reach that member through its share of the partnership’s profits, provided the R&D relates to a trade the partnership carries on or intends to carry on. What does not follow is cash: HMRC’s stated view is that the payable tax credit cannot be claimed on relief reaching a corporate member this way.
Why the partnership itself is never the claimant
The definition of “company” for these purposes is any body corporate or unincorporated association, but expressly not a partnership. That excludes the firm from the relief as an entity, whatever it does and however it is constituted. An LLP is in the same position despite its corporate personality, because it is treated as a partnership for tax and its profits are taxed on its members.
So the question is never really “can the LLP claim”. It is “is there a member who can”, and that depends entirely on who the members are. A firm whose members are all individuals — an ordinary partnership, or an LLP of individual members — reaches the same dead end as a sole trader: income tax, no corporation tax computation, no relief.
Where a corporate member changes the answer
Section 1259 of the Corporation Tax Act 2009 applies where a firm carries on a trade and a partner in it is a company within the charge to corporation tax. For any accounting period of the firm, the amount of the trade’s profits is determined, in relation to that partner, by working out what the profits chargeable to corporation tax would be if a company carried on the trade. HMRC puts it plainly: the partnership profit is calculated according to corporation tax rules, as though the partnership were itself a company.
That computational fiction is what lets R&D relief in. The additional deduction is taken in arriving at the firm’s profits computed on corporation tax principles, and the corporate member’s share of those reduced profits is what enters its own corporation tax computation. For the expenditure credit, HMRC’s guidance describes the credit being claimed by the individual corporate partner in its CT600, on its share of the R&D expenditure incurred and brought in as a taxable receipt in the company accounts.
Two conditions sit alongside. The R&D has to be relevant R&D by reference to the partnership: HMRC requires it to be related to a trade carried on, or intended to be carried on, by the partnership itself, not by the corporate member in some separate capacity. And the ordinary requirements still apply on top — qualifying R&D, qualifying costs, claim notification and the Additional Information Form.
The payable credit does not follow
This is the point that catches people out, and it is worth stating precisely. HMRC reads section 1259 as applying only for the purpose of calculating the profit attributable to the corporate member. On that reading the rules do not extend to the payable tax credit, and HMRC’s guidance states that payable tax credit cannot therefore be claimed in respect of this R&D tax relief.
The practical effect is that relief reaching a corporate member through a partnership arrives as reduced taxable profits, not as a cash credit. Under the merged scheme the mechanics differ — the credit is brought into the corporate partner’s CT600 as a taxable receipt rather than reducing its profit share — but the destination is the same: value against tax, not cash out. For a profitable corporate member with tax to pay, that is worth real money. For a loss-making corporate member hoping to surrender losses for cash — often the whole point of the exercise for an early-stage venture — it is not the outcome the structure was expected to deliver. This turns on the computation rule rather than on which scheme is in point, so it is not solved by choosing the merged scheme over ERIS.
It is also HMRC’s reading rather than an explicit statutory bar, and it sits in guidance written around the pre-reform schemes. HMRC’s own manual directs difficult cases in this area to its specialists. Where the amounts are material, that is a position to take advice on and document, not one to assume either way.
What this means for how you structure things
If genuine development work is being done through an LLP or partnership and the people behind it want R&D relief to work properly, the entity question deserves attention before the spending, not after. A company that carries on the development trade directly, incurs the costs and claims in the ordinary way avoids all of this. Where a partnership structure exists for good commercial reasons — a joint venture between corporate partners, a professional firm with a corporate member — the relief can still be reached, but the cash element usually cannot, and that changes the arithmetic.
The wider entity test is set out at who can claim R&D tax relief. If your structure involves a partnership with corporate members and you want to know what is actually available, talk it through with us before you commit to an approach.
Sources
- CIRD81220: company as member of partnership — partnership profit calculated according to CT rules as though the partnership were itself a company; the R&D must be related to a trade carried on, or intended to be carried on, by the partnership; these rules do not extend to payable tax credit, which cannot therefore be claimed in respect of this R&D tax relief.
- Section 1259, Corporation Tax Act 2009 — calculation of a firm’s profits and losses where a partner is a company within the charge to corporation tax.
- Section 1273, Corporation Tax Act 2009 — an LLP carrying on a trade with a view to profit has its activities treated as carried on in partnership by its members, and references to a company do not include it.
- CIRD89850: company as a member of a partnership — the expenditure credit claimed by the individual corporate partner in the CT600 on its share of the R&D expenditure, accounted for as a taxable receipt.
- CIRD81200: company subject to CT — “company” means any body corporate or unincorporated association but does not include a partnership.
- R&D tax relief: the merged scheme and ERIS — relief claimed through corporation tax by companies chargeable to corporation tax.
This page describes the rules as they stood at the review date above, as general information rather than advice on your circumstances. For how that distinction works, see our terms; for an answer on your own facts, talk to us.