Which R&D scheme applies to my company?

Step one: when did the accounting period begin?

Take the period you are claiming for, and look at its start date — not the date you spent the money, and not today’s date.

There is no apportionment. A period that began on 1 January 2024 and ended on 31 December 2024 is a legacy period from beginning to end, even though most of it fell after the merged scheme started. A period that began on 1 April 2024 is a merged scheme period in full, including expenditure incurred in the first week of it.

If you are claiming for more than one open year — which most companies making a first claim are — you will often be applying different rules to consecutive periods, and the arithmetic changes as well as the scheme. The rate and threshold timeline sets out which date drives which figure.

Step two, for periods beginning on or after 1 April 2024

Almost everyone is in the merged scheme. The only alternative is ERIS, and it is available only if all of the following hold:

• your company is an SME, counting linked and partner enterprises;
• the trade is loss-making before the R&D deduction is taken;
• qualifying R&D expenditure is at least 30% of total relevant expenditure, aggregated across connected companies — or you are within the one-period grace after a year in which you met the condition and claimed.

If any of those fails, you are in the merged scheme. Size no longer routes you: a large company and a small one claim the same relief in the same way.

If they all hold, you have a choice, and you cannot claim both reliefs on the same expenditure. ERIS is worth more per pound of qualifying spend, but restricted credit is lost under ERIS and carried forward under the merged scheme, and the two reliefs land differently in the accounts. The comparison is set out in the ERIS entry.

Two other things that used to change your scheme no longer do. Receiving a grant does not push you out of the merged scheme. Nor does doing work that someone else has paid for, although the separate question of who claims for contracted-out R&D still has to be answered, and the answer changed on 1 April 2024.

Step two, for periods beginning before 1 April 2024

Here size and circumstance decide the scheme, in this order:

Are you an SME? Fewer than 500 staff, and either turnover of no more than €100 million or a balance sheet total of no more than €86 million — counting linked and partner enterprises, which is where most of the difficulty is. If not, you claim RDEC.

If you are an SME, was the expenditure subsidised, or was the work contracted out to you? If it was, that expenditure goes into RDEC rather than the SME scheme, even though you are an SME. Grant-funded projects commonly split across both schemes in these periods.

If you are an SME claiming under the SME scheme, are you profitable or loss-making? Profitable companies take the additional deduction against profits. Loss-making companies can surrender the loss for a payable credit, and for expenditure incurred on or after 1 April 2023 a higher credit rate applied where R&D was at least 40% of total expenditure.

Special cases worth checking before you decide

Group companies. The SME test for legacy periods, and the ERIS intensity test for merged scheme periods, both look beyond the claimant company. Deciding either from the claimant’s own accounts is the most common structural error we see.

First accounting period. A new company’s first period is often longer or shorter than 12 months, or split into two returns. Check the start date of each one separately — a company incorporated in early 2024 can easily have a first period on one side of the boundary and a second on the other.

Change of accounting date. Shortening or extending a period changes its start date only if the change creates a new period. A period extended to 18 months is split into a 12-month period and a 6-month period for corporation tax, each with its own start date, and they can fall on opposite sides of 1 April 2024.

Contracted-out work across the boundary. Where you and the company you contract with have accounting periods on different sides of 1 April 2024, transitional rules decide which of you claims, so that the same R&D is neither relieved twice nor missed. Do not assume your own position settles it — the answer depends on the other party’s period too.

Companies that cannot claim at all. Some bodies are outside the relief entirely, and expenditure attributable to an exempt foreign permanent establishment does not qualify under any of the schemes.