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Enhanced R&D Intensive Support (ERIS) scheme for SMEs

The new merged R&D expenditure credit scheme applies to accounting periods beginning on or after 1 April 2024. This brings both SMEs and large businesses under the same scheme and applies the same above-the-line credit rate of 20%.

Against a concern that the merged scheme could negatively impact the most innovative SMEs, there is a second ‘scheme’ or ‘rate’ for loss-making R&D intensive businesses, called the Enhanced R&D Intensive Support (ERIS) scheme. The ERIS rate equates to a credit rate of up to 27% and an ‘intensive’ SME is defined as an SME whose qualifying R&D expenditure represents 30% or more of their total expenditure.

To find out how HMRC guidance for the Enhanced R&D Intensive Support (ERIS) scheme might impact your business, contact us.

Companies with a registered office in Northern Ireland

Finance Act 2025 enacted new legislation that will impact loss-making R&D intensive SMEs with a registered office in Northern Ireland. Loss-making R&D intensive SMEs are eligible for an enhanced rate of tax relief compared to other claimants. Companies with a registered office in Northern Ireland are subject to different rules with regards to ERIS.

 
The rules that apply specifically to companies registered in Northern Ireland are summarised below:
  • Overseas restrictions on expenditure related to contracted out R&D and Externally Provided Workers (EPWs) do not apply.
  • 3-year limit on the total additional relief, over and above what the company is entitled to through the new RDEC, plus any other de minimis aid received in the group. The amount must not exceed €300k.
 
These provisions take effect for claims made on or after 30 October 2024. HMRC will adapt the current Additional Information Form (AIF) to incorporate the necessary declarations in the coming months. For now, companies can use the existing AIF to make a claim.

Which companies qualify as R&D Intensive?

To qualify for the Enhanced R&D Intensive Support Scheme companies will need to be:

  • Recognised as an SME. You, and your connected companies, must employ fewer than 500 employees with either an annual turnover under €100 million or a balance sheet under €86 million.
  • Loss making
  • Have qualifying R&D expenditure which represents 30% or more of your total expenditure.

When does the ERIS scheme start?

The ERIS scheme applies, with the merged R&D expenditure credit, for accounting periods beginning on or after 1 April 2024.

Do I have to register as a R&D Intensive SME in advance?

No, an assessment is made as part of your R&D claim where qualifying expenditure and total expenditure are reported.

Do I have to prove that I’m an R&D Intensive SME every year?

Once you have claimed under the ERIS scheme in a single year then you can continue to qualify under that scheme for one further year, whether you reach the 30% target or not. This recognises the value of stability and consistency for SMEs.

What if my R&D expenditure fall short of the 30% qualification figure?

If your qualifying R&D expenditure does not reach 30% of your total expenditure, then the merged R&D expenditure credit will apply (an above-the-line credit rate of 20%).

What should my business be doing to ensure access to this enhanced R&D tax relief rate?

If you are a loss-making SME that invests heavily in R&D you should speak to your current advisor to confirm if you’re previous R&D spend constitutes at least 40% (for expenditure incurred on or after 1 April 2023), and also establish the forecast ratio for your accounting period starting on or after 1 April 2024. If your forecasted ratio is on the threshold of the 30% figure, then it is more important than ever to make sure that you document your R&D projects and costs so that you can evidence and optimise your qualifying R&D expenditure. Tracking that through the year will help you understand which scheme will likely apply to you.

Does the loss-making condition apply pre or post the R&D tax deduction?

For accounting periods starting on or after 1 April 2024, to qualify for the enhanced rate, the business must be in a loss-making position before the R&D tax calculation.

Reviewed by Akshay Thaman, IP and Policy Lead | 4 April 2025

Contact us to find out how you can make the most of your claim