Breaking it down: ERIS R&D Tax Credit Scheme

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ERIS Introduction 

Enhanced R&D Intensive Support (ERIS) was introduced at the same time as the merged scheme, for accounting periods beginning on or after 1^st of April 2024. This means that the first full accounting periods impacted by ERIS will be companies with a March 2025 year end.  However, there could a be shorter period that started after 1st April 2024. 

Background: What is ERIS and why was the ERIS scheme brought in?  

As some background, the merged scheme is a combination of RDEC and the SME scheme. Going forward, for accounting periods beginning on or after 1^st April 2024, all companies no matter size will claim under this. However, HMRC recognised that there are loss-making companies that are undertaking high-intensity R&D projects would need a higher rate of relief to continue to innovate effectively. Claiming under the ERIS scheme facilitates an additional relief for eligible claiming companies. This means that businesses who qualify for ERIS are able to receive higher benefit from the R&D tax relief than those claiming under the merged scheme. 

The ERIS scheme was designed specifically for loss-making SMEs and operated the same way that the SME scheme worked previously. The benefit for qualifying companies is more generous: for example, under ERIS a company can deduct an extra 86% of qualifying R&D costs (on top of the 100% deduction) giving a total deduction of 186%; known as the additional deduction. The additional deduction effectively increases the trading loss position in the period. For eligible loss-making SMEs, the outcome of this is tax credit at the rate of 14.5% of the surrenderable loss. In a suitable scenario, this can translate into an effective benefit of up to roughly 27p of cash per £1 of qualifying R&D spend.

What are ERIS eligibility criteria?

To qualify for ERIS, companies must meet a certain criteria to ensure qualification. To claim under ERIS, companies must:

1. The company must be an SME (fewer than 500 headcount and less than £100 million turnover or less than £86 million in total assets.

2. The company must be loss making

3. The business must devote at least 30% of their overall expenditure within the company (and connected companies) to qualifying R&D expenditure.  

I want to explore if my business is eligible to claim under ERIS:  

We encourage potentially eligible businesses to have a conversation around ERIS and if this is suitable for your business. At RCK Partners, we would be more than happy to facilitate this conversation.

If you have any questions or would like to learn more about the scheme please read our R&D tax credit webpage, or get in touch.

Written by Albert Cabral, Assistant R&D Manager.