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R&D tax relief guide (merged scheme and ERIS)
How the merged R&D expenditure credit (RDEC) scheme and the Enhanced R&D Intensive Support (ERIS) route work for accounting periods from 1 April 2024, what qualifies, and how to estimate your benefit.
Tax year: 2026/27. Last reviewed: Mon Apr 06 2026 00:00:00 GMT+0000 (Coordinated Universal Time).
R&D relief model (Excel)The two routes from 1 April 2024
From accounting periods starting on or after 1 April 2024, there is no longer a separate SME scheme. All companies claim through one of two routes:
- Merged RDEC (above-the-line credit): a 20% expenditure credit available to most companies. The credit is taxable, so after corporation tax at 25% the net benefit is 20% x 75% = 15p per £1 of qualifying spend.
- ERIS (Enhanced R&D Intensive Support): a more generous route for R&D-intensive loss-making SMEs. The key test is that qualifying R&D expenditure is at least 30% of total company expenditure (reduced from 40% from 1 April 2024). The ERIS payable credit is approximately 26.97p per £1 of qualifying spend (1.86 x 14.5%), and it is payable even when there is no corporation tax liability. It is NOT subject to a corporation tax haircut.
The 30% intensity test
Divide qualifying R&D spend by total company expenditure. If the ratio is 30% or above, and the company is loss-making, ERIS applies. If it is below 30%, merged RDEC applies.
At the model defaults (£500,000 total expenditure, £135,000 qualifying R&D): intensity = 27%. Below the 30% threshold, so merged RDEC applies.
What qualifies as R&D expenditure
Qualifying expenditure includes:
- Staff costs: employment costs of employees working on the project (100% qualifies). This is usually the largest category.
- Consumables and materials: items transformed or depleted in the R&D process (100% qualifies).
- Software: software purchased or licenced specifically for the R&D project (100% qualifies).
- Externally provided workers (EPW): agency workers. Up to 65% of the cost qualifies.
- Subcontractors: unconnected subcontractors. Only 65% of the cost qualifies. Connected-party subcontractors: 100% qualifies but with additional conditions.
- Clinical trial participants: costs of paying volunteers in clinical trials.
Capital expenditure is NOT in the R&D credit calculation (it may get separate R&D allowances under different rules).
The PAYE cap
The RDEC credit is capped at 3 times the PAYE and NIC costs of employees engaged in R&D. This cap rarely applies to genuine R&D-intensive businesses but can bite if you use many contractors or subcontractors relative to employees. ERIS has the same cap principle.
Worked example
| Input | Value |
|---|---|
| Total company expenditure | £500,000 |
| R&D staff costs | £120,000 |
| R&D consumables | £10,000 |
| R&D software | £5,000 |
| Subcontractor costs (0 in this example) | £0 |
| Qualifying R&D spend | £135,000 |
| Intensity ratio | 27.0% (below 30%; RDEC applies) |
| Gross RDEC credit (20%) | £27,000 |
| CT haircut (25%) | £6,750 |
| Net benefit | £20,250 |
How to claim
R&D tax relief is claimed through the company's corporation tax return (CT600). You must submit an Additional Information Form (AIF) to HMRC before filing the CT600 for any accounting period where a claim is made. The AIF asks for a technical narrative (the project description, the scientific or technological advance sought, the uncertainties overcome) and a financial breakdown.
HMRC has increased enquiry activity in this area. Claims should be well-documented and prepared by someone familiar with the qualifying criteria before submission.
What the model does not capture
The estimator gives a directional figure. It does not capture: the loss position (ERIS requires a loss-making position in the period); the PAYE cap; grants received (which reduce qualifying expenditure); connected-party rules; or the quality of the technical narrative. A specialist scopes a real claim before you submit.
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