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.
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.
To qualify for the Enhanced R&D Intensive Support Scheme companies will need to be:
The ERIS scheme applies, with the merged R&D expenditure credit, for accounting periods beginning on or after 1 April 2024.
No, an assessment is made as part of your R&D claim where qualifying expenditure and total expenditure are reported.
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.
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%).
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.
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.
