Enhanced R&D intensive support (ERIS) lets a loss making SME whose R&D spending is at least 30% of its total relevant expenditure deduct an extra 86% of its qualifying R&D costs and surrender the resulting loss for a payable credit of 14.5%. It applies to accounting periods beginning on or after 1 April 2024. A company that met the 30% test and claimed in its last 12 month period can still qualify for one year if it dips below the threshold.
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Who can claim enhanced R&D intensive support?
ERIS was created by Finance Act 2024, which modified Chapter 2 of Part 13 of the Corporation Tax Act 2009 (CTA 2009) for accounting periods beginning on or after 1 April 2024 (CIRD121000). HMRC describes it as a more limited continuation of the old SME scheme. To claim for an accounting period a company must, according to CIRD123000:
- be an SME and meet the existing SME scheme requirements;
- not be an ineligible company;
- make a trading loss for tax purposes before the 86% additional deduction is taken; and
- either meet the R&D intensity condition for the period, or have claimed under ERIS or the old SME scheme for its last 12 month accounting period and met the intensity condition for that period.
For R&D purposes an SME has fewer than 500 staff and either turnover of €100 million or less or a balance sheet total of €86 million or less (CIRD91900). Companies that are profitable, or are not R&D intensive, claim the merged R&D expenditure credit instead.
How is the 30% intensity condition measured?
Section 1045ZA CTA 2009 compares relevant R&D expenditure with total relevant expenditure. For accounting periods beginning on or after 1 April 2024 the company needs an intensity of 30% or more. HMRC expresses it as a formula at CIRD123000: the sum of relevant R&D expenditure of the claimant and every connected company, divided by the sum of their total relevant expenditure.
Total relevant expenditure is expenditure brought into account under generally accepted accounting practice in calculating trading profits, which HMRC describes as costs above the profit before tax line, plus pre trading expenditure relieved under section 1045 and amounts deducted under section 1308. It excludes payments or other transfers of value to a connected company, so intra group recharges are not counted twice, and amortisation added back under section 1308(5).
Relevant R&D expenditure is expenditure that would be qualifying Chapter 2 expenditure if the condition were met, whether or not a claim is made, including amounts that would be in total relevant expenditure but for the connected company exclusion.
Every company connected with the claimant on at least one day of the accounting period is included, whether in the UK or overseas. Where a connected company has a different year end or is overseas, its costs must be attributed to the claimant’s period on a reasonable basis, applied consistently.
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How does the one year grace period work?
A company that falls below 30% can still claim ERIS if it met the intensity condition in its last 12 month accounting period and made a valid claim to SME relief or ERIS in that period. HMRC’s guidance adds that the earlier claim must have been on expenditure incurred on or after 1 April 2023. The grace period covers a single dip, for example a year with a large non R&D cost. If the company is below the threshold for a second year running, the previous period no longer meets the condition and the merged scheme becomes the route.
The intensity threshold has changed. For accounting periods beginning before 1 April 2024, R&D intensive SMEs needed 40% to keep the higher 14.5% credit under the old SME scheme, and for those periods there was no loss making condition (CIRD127000 and CIRD123000).
How do the 86% deduction and 14.5% credit work?
CIRD122000 sets out two claims. First, the qualifying expenditure is multiplied by the additional deduction rate of 86% under section 1044(8). That increases the trading loss, so with the 100% deduction already in the accounts the total deduction is 186%. Second, the company may surrender all or part of its surrenderable loss for a payable tax credit at 14.5% under section 1058(1)(a). The credit is not taxable income, and neither claim has to be for the maximum.
The surrenderable loss under section 1055(2) is the lower of 186% of the qualifying expenditure on which the additional deduction was taken and the unrelieved loss. The unrelieved loss ignores losses brought forward or carried back and excludes any part of the loss that was, or could have been, set against total profits of the same period under section 37(3)(a) CTA 2010, or relieved in another way, including by group relief. The credit is also limited by the PAYE cap of £20,000 plus 300% of the company’s relevant PAYE and National Insurance liabilities, and under ERIS a claim above the cap is invalid (CIRD140000).
Can you show a worked example?
HMRC’s own examples at CIRD122000 show how other income limits the credit.
| Company A | Company B | |
|---|---|---|
| Qualifying expenditure | £100,000 | £100,000 |
| Trade loss before additional deduction | £50,000 | £50,000 |
| Additional deduction at 86% | £86,000 | £86,000 |
| Enhanced trade loss | £136,000 | £136,000 |
| Other income | None | £100,000 property profits |
| Unrelieved loss | £136,000 | £36,000 |
| Tax credit at 14.5% | £19,720 | £5,220 |
Company B’s unrelieved loss is £36,000 whether or not it actually sets the loss against its property profits, because the test asks what could have been relieved.
Should you claim ERIS or the merged scheme?
An eligible company can choose the merged scheme instead, but cannot claim both for the same expenditure. Illustration only: on £100,000 of qualifying expenditure, the most ERIS can give is 14.5% of £186,000, which is £26,970, and only where the unrelieved loss is at least that large. A loss making company in the merged scheme would receive a £20,000 credit, reduced by notional tax at 19% to £16,200 payable. ERIS is usually worth more when the loss is large enough, but the answer changes with other income, group relief and the PAYE cap.
If HMRC removes an ERIS claim after an enquiry because the conditions were not met, the company may make or amend a merged scheme claim within 30 days of the closure notice, or within 30 days of an appeal being finally determined (CIRD181000).
How do you claim, and what goes wrong?
ERIS is claimed in the company tax return or an amendment with a CT600L, supported by the additional information form, and the surrendered loss must be written off in the computations. Claims can be made within two years from the end of the period of account where it is no longer than 18 months, and a claim notification may be needed within six months of the end of the period of account; see R&D claim notification. Companies with a registered office in Northern Ireland follow special rules unless they opt out. For how the credit appears in the accounts see accounting for R&D tax credits, and for using any remaining loss see company trading losses.
Common mistakes are leaving connected companies out of the intensity calculation, testing the loss after the 86% deduction instead of before it, ignoring other income when working out the unrelieved loss, claiming above the PAYE cap, and relying on the grace period when no valid claim was made for the earlier period.
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Related Accountapedia entries
- The PAYE cap on R&D payable credits
- Group relief for carried forward losses
- Who claims R&D relief on contracted work
- Which costs qualify for R&D tax relief
- Restrictions on overseas R&D costs
Sources
- GOV.UK: Manual page CIRD121000
- GOV.UK: Manual page CIRD123000
- GOV.UK: Research and development rd tax relief the merged scheme and enhanced
- GOV.UK: Manual page CIRD91900
- GOV.UK: Manual page CIRD122000
- GOV.UK: Manual page CIRD127000
- GOV.UK: Manual page CIRD140000
- GOV.UK: Manual page CIRD181000
- GOV.UK: Manual page CIRD183000
- GOV.UK: Manual page CIRD112100
Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 19 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.