No. R&D tax relief is a corporation tax relief, available only to entities chargeable to UK corporation tax, which in practice means companies. Sole traders pay income tax on their profits, not corporation tax, so they sit outside the relief entirely, however genuinely scientific or technological their work is. There is no income tax equivalent to claim instead.
The relief can still reach a sole trader’s work, but from the other side of the invoice. A company that engages a self-employed individual directly is not paying for an externally provided worker — CIRD84100 is explicit that there is no externally provided worker without a contract between the individual and a staff provider — but the payment may be a contractor payment for contracted-out R&D under CTA 2009 s1133, which turns on whether the company intended or contemplated, on the contract terms and the surrounding circumstances, that R&D of that sort would be done. Where it did, s1136 puts 65% of the portion attributable to UK R&D into the company’s claim. The sole trader claims nothing either way; the company that commissioned the work is the one holding the claim.
Partnerships and LLPs
An ordinary partnership of individuals is in the same position as a sole trader: its members pay income tax, so there is no route to the relief. An LLP normally cannot claim in its own right either, but there is one way in. Where a member of the LLP is a company, relief can reach that corporate member through the corporation tax computation of its share of the partnership’s profits, provided the R&D relates to a trade carried on, or to be carried on, by the partnership itself. The mechanics differ by scheme — under the merged scheme the credit is brought into the corporate partner’s CT600 as a taxable receipt rather than reducing its profit share, though the destination is the same: value against tax, not cash out — the individual members get nothing, and the position should be checked rather than assumed. One restriction is not scheme-specific. HMRC reads CTA 2009 s1259 as applying only for the purpose of calculating the profit attributable to the company, so the relief reaches the corporate member as reduced partnership profits in its own corporation tax computation and a payable tax credit cannot be claimed in respect of it. That is HMRC’s published reading of the computation rule rather than an explicit statutory bar, and it is the position to plan on. That turns on the computation rule rather than on which scheme is in point. The usual conditions apply on top: qualifying R&D, qualifying costs and the compliance steps every claim now carries.
What if you incorporate?
A company you form can claim for the qualifying R&D it carries out and pays for once it exists. What it cannot do is reach back: expenditure you incurred personally as a sole trader, before the company existed, is not the company’s expenditure and cannot go into the company’s claim. If you are doing genuine development work and weighing up incorporation, the availability of R&D relief is one factor among the commercial and tax considerations, and timing matters, because only work from incorporation onwards can ever be claimed.
Two compliance points catch new companies in exactly this position. A first-time claimant is usually caught by the claim notification requirement: HMRC must be notified within six months of the end of the period of account, and a missed window invalidates the claim with no late route. And every claim requires the Additional Information Form before or with the return. Neither step is difficult; both are unforgiving.
Where to go next
If you trade through a company already, the four conditions for a claim are set out in what your company needs to qualify. If you are a sole trader considering incorporation and want the R&D position considered properly alongside everything else, talk to us before you decide, not after.
Sources
- R&D tax relief: the merged scheme and ERIS — relief claimed through corporation tax by companies.
- Tell HMRC you plan to claim — the notification requirement that catches first-time claimants.
- CIRD81220: company as member of partnership — s1259 applies only for calculating the profit attributable to the corporate member, and payable tax credit does not follow.
- CIRD84100: externally provided workers, definition — a payment to a self-employed consultant is not a payment for an externally provided worker, and may instead be on subcontracted R&D.
- CTA 2009 s1133 and s1136 — contracted-out R&D and the intended-or-contemplated test, and the 65% qualifying element of a contractor payment.
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.