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We’re an LLP. Do We Quality for R&D Tax Credits?

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The short answer: No. Not directly

As an LLP, you don’t qualify for R&D Tax Credits. Only companies that pay UK Corporation tax are eligible for R&D Tax Credits. As LLPs are exempt from Corporation tax, you can’t receive tax credits directly. However, there is one exception.

The one exception: R&D partnerships

You can reclaim some of your R&D development costs in tax credits under one condition: the R&D was conducted in partnership with a company that does pay Corporation tax. In that case, your partner qualifies for the R&D Tax Credits scheme and you could receive some of the tax windfall depending on how you’ve structured your collaboration. Exactly how much you receive usually depends on how you divide up the profits generated by the partnership.

A quick example

It’s a little complicated, so let’s use an example. Let’s say that you developed a new app in partnership with an SME. The project costs £100,000. The app generates revenues of £400,000 – a profit of £300K. Your partner invested slightly more in the app’s development, so you agree on splitting the profits 60:40. You receive £120,000, while your partner takes £180,000. Your partner then pays 19% corporation tax on their slice of the profits. £34,200 goes to HMRC.

More good news. In developing the app you conducted R&D that meets HMRC’s eligibility criteria for tax credits. You can find more information about R&D Tax Credits eligibility here:

Your partner successfully applies for tax credits via their Corporation tax return, and recoups 25% of your combined R&D costs in tax credits: £25,000. Just as with the profits, you split the tax windfall 60:40. That means you get another £10,000 on top of the profits you’ve already taken. Nice!

Get in touch!

In summary, you can make some money back on your R&D through tax credits, but it’s a complicated process. If you’re unsure about whether your LLP qualifies for tax credits or how to maximise your payout, be sure to give us a call. GrantTree’s team of R&D Tax Credits experts will be happy to help!

If you are curious about R&D Tax Credits, Innovation Grants and Open Culture

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Sam Aiken
ABOUT THIS AUTHOR
Sam Aiken

Sam graduated from Portsmouth University with a degree in Business Economics and is spreading his wings in the financial sector by filing R&D Tax Credits at GrantTree.







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