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R&D tax relief for a one-person contractor company: the claim most routine dev work doesn't qualify for

By Buzz Accounting · 2026-10-21

A contractor running their own one-person limited company and building genuinely novel software — a new algorithm, a system nobody has built before, something where the answer wasn't obvious from the documentation — can claim R&D tax relief on that work, same as any other UK company. Most don't, usually for one of two opposite reasons: either nobody tells a solo contractor this exists, or someone tells them half the story and they claim on routine client work that was never going to qualify. Both mistakes are expensive, in different directions, and the paperwork HMRC now demands before it will even look at a claim has got noticeably stricter since 2023.

What actually counts as R&D for tax purposes

HMRC's test is narrower than "writing code I hadn't written before." The work has to seek an advance in science or technology, resolving a scientific or technological uncertainty that a competent professional in the field couldn't readily work out in advance. Building a website, integrating two established APIs, or customising an off-the-shelf platform for a client — the bread-and-butter of most contract development — does not qualify, however many hours it took or how clever the result looks. What does qualify is work like developing a new data-processing method where the performance characteristics were genuinely uncertain beforehand, or building novel algorithms to solve a technical problem with no established solution. The test is about technological uncertainty, not commercial risk or how hard the client thought it was.

The merged scheme: what it actually pays

Since accounting periods beginning on or after 1 April 2024, the old separate SME and RDEC schemes were replaced by a single merged scheme. It works as an above-the-line expenditure credit: 20% of qualifying R&D expenditure, which is itself taxable income, so the net benefit after Corporation Tax works out at roughly 16.2% for a company paying the 19% small profits rate, or 15% for one paying the 25% main rate. For a one-person contractor company, that is the headline figure: spend £60,000 of the year on genuinely qualifying development (your own salary charged to the R&D project, subcontractor costs, software, consumables), and the merged scheme is worth somewhere around £9,000 to £9,700 net, depending on which Corporation Tax rate applies.

Loss-making and R&D-intensive: the better route for many solo contractors

A separate, more generous route exists for loss-making companies that are R&D-intensive — where qualifying R&D expenditure is at least 30% of total expenditure for the period (lowered from 40% on 1 April 2025, which brought more small claimants into scope). Under Enhanced R&D Intensive Support (ERIS), the company gets an 86% enhanced deduction on top of the normal 100% (186% total), and can surrender the resulting loss for a 14.5% payable cash credit. For a one-person company spending most of a loss-making year building the product itself rather than invoicing clients — a common pattern for a contractor between assignments who is developing their own tool — this route pays out in cash, not just a reduced tax bill, which matters when there's no profit to offset against in the first place.

Worked example, illustrative figures, 2026/27 rates. A solo contractor's limited company spends three months of a quiet year building a genuinely novel data-matching tool, rather than billing clients. Total qualifying R&D costs for the period — the director's own salary allocated to the project, a subcontracted specialist, and cloud compute — come to £45,000, against total company expenditure for the period of £70,000. That is 64% R&D intensity, comfortably over the 30% ERIS threshold, and the company made a loss for the period.

Enhanced deduction: £45,000 × 186% = £83,700 added to the loss for the period.
Surrendered for a payable credit at 14.5%: £83,700 × 14.5% = £12,136.50 paid to the company in cash.

Compare that with the merged scheme's net benefit on the same £45,000 at the small profits rate: roughly £7,290 (16.2%) — and only available at all if the company has enough profit elsewhere to use the credit against, which a quiet loss-making period often doesn't. The ERIS route pays nearly £4,850 more here, in cash, specifically because the company is both loss-making and R&D-intensive.

The paperwork that throws out a genuine claim before HMRC even looks at it

Two forms now sit in front of every claim, and missing either one is fatal regardless of how strong the underlying R&D is. First, a Claim Notification Form must be submitted within six months of the end of the period of account for any company that hasn't claimed R&D relief in any of the preceding three years — which covers almost every solo contractor claiming for the first time. Miss that six-month window and the claim for that whole period is invalid before it's even submitted; there is no late-filing appeal route. Second, an Additional Information Form is mandatory on every claim, first-time or not, and must be submitted before or on the same day as the Company Tax Return that contains the claim. HMRC will strip the R&D figure out of a return filed without one, on sight, without assessing the underlying work at all.

What to do this week

If your company has done any genuinely novel technical work this year that you haven't billed as a straightforward client project, work out the date six months after your period of account ends — that is your real deadline for the Claim Notification Form, not the Corporation Tax filing deadline.
Separate what you built from how hard it felt: ask whether a competent developer in the field could have looked up the answer, or whether there was a genuine technological uncertainty. Routine integration and configuration work doesn't qualify, whatever the invoice said.
If the company made a loss for the period and R&D spend is a large share of total costs, check the 30% R&D-intensity threshold before defaulting to the merged scheme — ERIS can pay out considerably more, in cash, when you qualify.
Keep contemporaneous notes of the technical uncertainty you were resolving and how, while you're doing the work — reconstructing this a year later, after an HMRC compliance check has already opened, is far harder than writing it down at the time.

We review whether development work genuinely meets HMRC's R&D test before a claim goes anywhere near a tax return, track the Claim Notification Form deadline so a first-time claim is never thrown out on a technicality, and work out whether the merged scheme or ERIS pays more for your actual numbers. This sits alongside the wider structure decisions in our salary and dividends guide for one-person companies. Fixed fees from £29 + VAT a month. Get started.

Quick answers

About this post

Can a one-person contractor limited company claim R&D tax relief?

Yes, in principle — there is no size exemption that rules out a solo-director company, and the relief is assessed on the work, not the headcount. The test is whether the company's own development work seeks an advance in science or technology by resolving a genuine technological uncertainty that a competent professional in the field couldn't readily have worked out in advance. Most routine contract development, integration and configuration work for clients does not meet that bar, which is why many solo contractors who could claim never do, and a smaller number claim on work that was never going to qualify.

What does the merged R&D scheme actually pay in 2026/27?

For accounting periods beginning on or after 1 April 2024, qualifying R&D expenditure attracts a 20% above-the-line expenditure credit, which is itself taxable. After Corporation Tax, that works out as a net benefit of roughly 16.2% of qualifying spend for a company paying the 19% small profits rate, or about 15% for one paying the 25% main rate. On £45,000 of qualifying costs, that is a net benefit of roughly £6,750 to £7,290 depending on the company's Corporation Tax rate for the period.

What is Enhanced R&D Intensive Support and who qualifies?

It's a more generous route for loss-making SMEs where qualifying R&D expenditure is at least 30% of total expenditure for the period, a threshold lowered from 40% on 1 April 2025. Qualifying companies get an 86% enhanced deduction on top of the normal 100% deduction, and can surrender the resulting loss for a 14.5% payable cash credit. It pays in cash even where the company has no profit to offset a tax credit against, which is often exactly the position a solo contractor is in during a loss-making development period.

What is the Claim Notification Form and when is it due?

It's a mandatory advance notification to HMRC, required for any company that hasn't claimed R&D tax relief in any of the three preceding accounting periods — which covers almost every first-time claimant. It must be submitted within six months of the end of the period of account the claim relates to. Miss that deadline and the claim for that entire period becomes invalid before HMRC has looked at the underlying work, with no route to appeal the lateness, so it needs diarising separately from the normal Corporation Tax filing deadline.

What is the Additional Information Form and is it really mandatory?

Yes, on every single R&D claim, whether it's a first claim or the tenth. It must be submitted to HMRC before, or on the same day as, the Company Tax Return that contains the claim, and it sets out the technical and financial detail behind the figure being claimed. HMRC removes the R&D claim from a return automatically if this form wasn't filed in advance, without assessing whether the work itself would have qualified — it is a pure procedural gate, separate from whether the claim is otherwise strong.

Does routine freelance coding or app development qualify for R&D relief?

Usually not. Building a website, wiring together established APIs, or customising existing software for a client's needs is standard professional work, not R&D, however technically demanding it felt or how many hours it took. The test HMRC applies is whether a competent professional in the field would have known how to achieve the result in advance — if the answer was findable in documentation, a forum, or by asking another developer, there was no technological uncertainty to resolve, and the work doesn't qualify.

Is it worth claiming R&D relief on a small amount of qualifying spend?

It depends on the admin cost against the benefit, but it's rarely worth stretching a claim to cover borderline work just to make the numbers look better. A smaller, clean claim on genuinely qualifying costs — correctly notified within the six-month window and backed by an Additional Information Form — is lower-risk than a larger claim padded with routine development work, which is exactly the pattern HMRC's R&D compliance checks have been targeting since the claim volumes were tightened up from 2023 onwards.

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