What is enhanced R&D intensive support (ERIS)?

Who can claim

Four conditions, all of which must hold.

You are an SME. The definition is unchanged by the reform, and it counts linked and partner enterprises, so a company owned by a larger group is usually not an SME even if it is small on its own numbers.

You have a trade chargeable to UK corporation tax. Certain bodies are excluded, and expenditure attributable to an exempt foreign permanent establishment does not qualify.

You are loss-making before the additional deduction. ERIS is relief for loss-making R&D-intensive SMEs. If your trade is in profit before the 86% deduction is applied, ERIS is not available to you for that period — the merged scheme is your route, whatever your R&D intensity.

You meet the R&D intensity condition, or are treated as meeting it under the grace period rule below.

The 30% intensity test

For accounting periods beginning on or after 1 April 2024, your relevant R&D expenditure must be at least 30% of your total relevant expenditure.

Two things about that fraction catch people out.

It is measured across connected companies, not just yours. Every company connected to you on at least one day of the accounting period is brought into both the numerator and the denominator. A lean R&D company sitting alongside a trading company in the same ownership will very often fail a test it passes on its own accounts.

Total relevant expenditure is not the same as costs in the profit and loss account. It is expenditure brought into account in calculating profits under generally accepted accounting practice — above the profit before tax line — together with expenditure relieved under the pre-trading rules and amounts brought into account under the intangibles rule at section 1308. Payments to connected companies are excluded, as are amortisation add-backs, so that the same spend is not counted twice across the group.

As a result, the fraction has to be built from the accounts deliberately. It is not a figure you can read off a management report, and a claim that asserts intensity without a schedule behind it will not survive a compliance check.

The grace period

If you met the intensity condition in your previous accounting period and claimed under ERIS or the legacy SME scheme for it, you are treated as meeting the condition for the current period even if you fail the 30% test.

Two details matter. The previous period must be a 12-month accounting period, and there must have been a valid claim for it. A company that qualified on the numbers in the earlier year but did not claim gets no grace period, which is why you shouldn’t leave a marginal earlier year unclaimed.

The grace period is one period, not a rolling exemption. It is designed for the year in which a company wins a large non-R&D contract and dilutes its own fraction, not as a permanent route in.

What ERIS is worth

For accounting periods beginning on or after 1 April 2024:

• an additional deduction of 86% of qualifying R&D expenditure, on top of the normal 100%, so 186% in total; and
• a payable tax credit of 14.5% of the surrenderable loss.

Where the whole 186% is surrendered, that is 26.97% of qualifying expenditure, received in cash. The figures and the periods they apply to are in the rate and threshold timeline.

The payable credit is subject to the same PAYE and NIC cap as the merged scheme — £20,000 plus 300% of your relevant PAYE and NIC liabilities — with the same exemption for companies creating or managing their own intellectual property that spend no more than 15% with connected subcontractors and externally provided workers. One significant difference: under ERIS, credit restricted by the cap is lost. It does not carry forward as it does under the merged scheme. For a company with a small payroll and heavy subcontracted or externally provided labour, that difference can outweigh the higher headline rate.

Choosing between ERIS and the merged scheme

You may be eligible for both. You cannot claim under both for the same qualifying expenditure, but you can claim ERIS on one project’s expenditure and the merged scheme on another’s where that produces a better result.

The comparison is not simply 26.97% against 16.2%. Work through:

• The PAYE cap. If the cap restricts the claim, ERIS loses the excess, and the merged scheme carries it forward. A company that is capped in a growth year may prefer the merged scheme.
• Losses you would otherwise carry forward. ERIS surrenders losses for cash at 14.5%. If the company expects to be profitable soon, those losses may be worth 25% as a deduction against future main-rate profits. Cash now against more relief later is a commercial decision, not a tax one, and it should be put to the client in those terms.
• How the credit shows in the accounts. The merged scheme credit is income above the line and improves reported profit; the ERIS credit does not. For a company raising money on its numbers, that difference is not trivial.

Position for accounting periods beginning before 1 April 2024

There was an earlier version of intensive support inside the legacy SME scheme: for expenditure incurred on or after 1 April 2023, a loss-making SME whose R&D was at least 40% of total expenditure kept the payable credit rate of 14.5% rather than dropping to 10%. There was no grace period. The threshold came down to 30%, and the grace period was introduced for accounting periods beginning on or after 1 April 2024, when the relief became ERIS in its own right.