To qualify under the ERIS scheme, a company must meet the definition of R&D intensity. This is based on the proportion of its total relevant expenditure that relates to qualifying R&D. A company is considered R&D-intensive if its qualifying R&D expenditure represents at least 30% of its total relevant expenditure for that accounting period. This is assessed using figures from the company’s accounts and Corporation Tax computation.
Alongside the merged scheme, HMRC also announced another new scheme which is the enhanced R&D Intensive Support scheme, also known as ERIS. This means that the UK’s R&D tax relief regime changed for businesses with accounting periods beginning on or after 1 April 2024.
Enhanced R&D intensive support is a targeted form of R&D tax relief that is available to certain SMEs. It applies where a company is loss-making and meets the definition of an R&D intensive company.
This scheme sits alongside the merged R&D scheme, it provides an alternative route to claiming R&D tax relief where companies meet a stricter criteria that aligns with their level of qualifying R&D expenditure.
The intent of ERIS is to support companies whose activity is heavily focused on research and development, particularly in areas where that activity has not yet generated taxable profits.
| Compare HMRC ERIS & Merged Scheme R&D Tax Relief Rates | ||||||
|---|---|---|---|---|---|---|
| Understand the requirements and key changes for R&D tax credits schemes | ||||||
| Company Type | ERIS: Enhanced R&D Intensive Support | Merged Scheme | ||||
| Primary Target | Loss-making R&D Intensive SMEs | All Companies (default) | ||||
| R&D Intensity Req. | ≥ 30% | None | ||||
| Benefit Mechanism | 86% Add. Deduction + 14.5% Credit | 20% Taxable Credit | ||||
| Cash Value (approx.) | Upto ~27% of Spend | Upto ~15%-16.2% of Spend | ||||
| Credit Taxable? | No: Non-Taxable Cash Payment | Yes: Taxable Income | ||||
| CNF Required? | Yes | Yes | ||||
If the company’s claim does not meet the ERIS criteria it will typically fall within the merged R&D scheme instead. When it comes to spotting the difference between these two schemes, make sure to look at:
This means that R&D eligibility must be assessed cautiously for each relevant accounting period. A company may qualify for ERIS in one accounting period but will not qualify in another, depending on its relevant qualifying R&D expenditure.
Can't decide which scheme is right for your business? We understand finding the right scheme for your business is key!
For accounting periods starting on or after April 1, 2024, the UK has replaced the old R&D schemes with a Merged Scheme (taxable RDEC, generally 20%) for most companies, and the Enhanced R&D Intensive Support (ERIS) scheme for loss-making, R&D-intensive SMEs (offering ~27% benefit). ERIS requires 30% R&D intensity.
Merged Scheme (RDEC): Combines the old RDEC and SME schemes into an "above-the-line" credit. It is now the default scheme for most companies.For loss-making SMEs where R&D expenditure is at least 30% of their total expenditure. Typically provides up to 27p per £1 spent through a 14.5% tax credit on surrenderable losses.
Who it's for: Loss-making SMEs.
Eligibility Intensity: The company must have an R&D intensity (R&D spend / Total expenditure) of at least 30%.
Benefit: A higher payable credit rate (14.5% of the surrenderable loss).
Prerequisite: A Claim Notification Form (CNF) form for R&D tax relief in the UK must be submitted to HMRC within 6 months after the end of the companies accounting period in which the R&D activity occurred. and if the company is considered
a new claimant or has not claimed in the previous three years. For instance, if your accounting period ends on 31 December 2025, the deadline is 30 June 2026.
Mechanism: Allows an additional 86% deduction, resulting in a higher cash benefit than the merged scheme.
Prerequisite: CNF submission
Cash Credit Rate: 14.5% of surrenderable loss
Relief Rate: 186% total deduction
ERIS is particularly relevant for companies that:
To qualify under the ERIS scheme, a company must meet the definition of R&D intensity. This is based on the proportion of its total relevant expenditure that relates to qualifying R&D. A company is considered R&D-intensive if its qualifying R&D expenditure represents at least 30% of its total relevant expenditure for that accounting period. This is assessed using figures from the company’s accounts and Corporation Tax computation.
Qualifying R&D expenses for tax relief in the UK generally fall into six primary categories of revenue expenditure (day-to-day operational costs).
Staff Costs:
Employee salaries, employer National Insurance (NI) contributions, and pension contributions for members of staff involved in the qualifying R&D projects.
Externally Provided Workers (EPW):
Costs relating to subcontractors or agency workers who contribute to qualifying R&D activities.
Software:
Software licences that were used directly in Research and Development work.
Consumables:
Materials, utilities, and other items consumed during experimentation, testing, or prototype development.
Data and Cloud Computing:
Costs relating to cloud computing services or datasets used in relation to qualifying activity on R&D projects.
Prototypes:
Design and Build costs for the design, construction, and testing of a prototype used to resolve technical uncertainty.
Qualify as an SME for R&D tax purposes:
Company must meet specific headcount and financial criteria, taking into account any linked or partner enterprises.
Be loss-making:
To claim the company must not be profitable In the relevant accounting period.
Undertake qualifying R&D activity:
In line with HMRC’s definition of qualifying activity.
Only the proportion of these costs that relates directly to qualifying activity can be included in an R&D tax relief claim.
Capital Expenditure:
The cost of buying land, buildings, or machinery/equipment, which are generally covered under capital allowances.
Production and Distribution Costs:
Costs associated with the routine manufacturing, production, and distribution of goods or services for sale.
Routine Testing and Analysis:
Quality control testing, efficiency surveys, and routine data collection, as well as cosmetic changes to existing products.
Indirect Overhead Costs:
General office expenses, such as travel costs, rent, rates, utilities, heating, lighting (unless directly part of a lab/testing environment).
Intellectual Property Costs:
Expenses related to the creation, registration, or defense of patents and trademarks.
Profit-making:
The Company must have made a loss in the relevant accounting period.
Applies only to loss-making SMEs meeting the 30% intensity threshold. The benefit is received as a cash payment — it does not increase taxable profits. The effective rate is approximately 27% of qualifying spend. Period-by-period assessment: A company may qualify for ERIS in one accounting period but not in another. Eligibility must be assessed separately for each period based on R&D expenditure relative to total relevant expenditure.
Under ERIS, eligible loss-making companies can access a higher rate of payable credit than is available under the merged scheme. The relief is calculated through the Corporation Tax computation and is based on qualifying R&D expenditure.
For eligible companies, the claim typically results in a payable cash credit rather than a reduction in Corporation Tax liability. Crucially, unlike the merged scheme’s above-the-line RDEC, the ERIS credit is non-taxable — it is received as a cash payment without increasing taxable profits. The value of the credit depends on the level of qualifying R&D expenditure, the company’s tax position, and the applicable credit rate for the accounting period.
If a company’s claim does not meet the ERIS criteria, it will typically fall within the merged R&D scheme instead. The two schemes differ in scope, eligibility, and the nature of the relief provided.
Several recurring issues arise when companies assess whether their activities and expenditure meet the ERIS criteria. Claims under ERIS follow the same administrative framework as other R&D tax relief claims and are submitted through the company’s Corporation Tax return. The process involves five stages:
Determining whether a company meets the 30% intensity threshold requires a structured review of qualifying R&D expenditure against total relevant expenditure. Eligibility under the ERIS scheme will depend on both the nature of the work and the composition of the company’s expenditure. This will involve the following three steps:
When classifying expenditure, it is crucial that this information is identified and apportioned as accurately as possible. Estimation of expenditure can affect whether the threshold is met. This is relevant in cases where companies carry out both R&D and commercial activities. Expenditure will need to be carefully separated and evidenced in order to avoid an enquiry from HMRC.
A structured review can determine whether a company qualifies for ERIS or whether the claim should be made under the merged R&D scheme. For more information about the ERIS scheme and claiming R&D tax credits, please get in touch with our team.
A: Yes — eligibility is assessed period by period. A company may qualify for ERIS in one accounting period and fall within the merged scheme in another, depending on its R&D intensity and profitability in each period.
A: If the ERIS intensity threshold is not met, the company’s claim will typically default to the merged R&D scheme. This still provides relief but at the lower effective rate of approximately 15–16% rather than ERIS’s ~27%.
A: HMRC may take connected company figures into account when determining eligibility. Companies are treated as connected if one controls the other, or both are under the control of the same person or persons — regardless of whether they are UK-based or overseas.
A: No. Unlike the merged scheme’s RDEC, the ERIS payable credit is non-taxable. It is received as a cash payment and does not increase the company’s taxable profits — which is one of the key advantages of ERIS over the merged scheme for eligible SMEs.
A: No. ERIS uses the same HMRC definition of qualifying Research and Development as the merged scheme. The key differences are in eligibility criteria (loss-making SME + intensity threshold) and the resulting benefit rate — not in how qualifying R&D activity is defined.
A: Yes, ERIS is subject to the PAYE/NIC cap.
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