What ERIS is
When the old SME scheme closed, one piece of it survived. Enhanced R&D Intensive Support keeps a deduction-plus-credit route open for the companies the old scheme most favoured: small, loss-making, research-dominated businesses. HMRC’s manual is explicit that enhanced support under ERIS is only available to R&D-intensive SMEs which are, before taking the additional deduction, making a trading loss for tax purposes.
Everyone else, including profitable SMEs and any company over the size limits, claims the merged scheme instead.
The three gates
Gate one: SME. Broadly, fewer than a set number of staff, and under a turnover or balance-sheet ceiling, with the figures set in euros. Linked and partner companies are counted into the test, so a small company inside a bigger structure can fail it. The detail is on who qualifies.
Gate two: loss-making. The company must be making a trading loss for tax purposes before the additional deduction is taken. This is a tax computation test, not an accounts headline, and the two can differ.
Gate three: R&D-intensive. Qualifying R&D expenditure must be at least a set percentage of the company’s total relevant expenditure, and the expenditure of connected companies counts in both sides of that fraction.
What it is worth
ERIS works in two steps. First, the company deducts an extra percentage of its qualifying costs on top of the normal 100% deduction, deepening its loss for tax purposes. Second, it can surrender that loss for a payable cash credit at a set rate. Because the company is loss-making, the value arrives as cash rather than a lower tax bill, which is exactly why the route matters to pre-revenue businesses.
The payable amount is subject to the PAYE and National Insurance cap, and under ERIS a claim above the cap is invalid rather than trimmed or carried forward. The cap mechanics are on the PAYE cap.
The grace period
Intensity is measured per accounting period, and a single unusual year, a hiring surge, a one-off legal bill, a marketing push, could otherwise knock a genuinely R&D-intensive company out of the regime for that year. The rules soften this: a company that met the intensity condition and made a valid claim in its last 12-month accounting period can be treated as meeting it in the following period.
When ERIS is not your route
The honest list, because most loss-making SMEs that do some R&D will not be in ERIS:
- Your intensity is real but below the threshold once connected companies count. You claim the merged scheme, which is normal, not a failure.
- You are profitable before the R&D deduction. Merged scheme.
- You are over the SME ceilings, alone or with linked and partner enterprises. Merged scheme.
- You are not a going concern on the statutory test, or in administration or liquidation. Then the problem is bigger than route selection, and payable claims are restricted either way.
- Your “R&D” does not meet the definition. No route fixes that; start with what counts as R&D.
One more honesty note: a company with its registered office in Northern Ireland claims by default under a separate ERIS variant with materially different rules (a company with no trade in goods and no relevant electricity-market activities can opt out and use the standard rules). The additional relief sits under a rolling cap (broadly €300,000 of de minimis aid over three years for most businesses, counted with other de minimis aid across the group). In exchange, there is no overseas restriction on contracted-out R&D and externally provided workers. If that is you, the standard figures on this page are not your figures.
- HMRC, Research and Development (R&D) tax relief: the merged scheme and enhanced R&D intensive support, gov.uk
- HMRC, CIRD121000 (enhanced R&D intensive support: overview), Corporate Intangibles Research and Development Manual, gov.uk
- HMRC, CIRD123000 (the R&D intensity condition), Corporate Intangibles Research and Development Manual, gov.uk
- HMRC, CIRD91900 (SME definition: the ceilings), Corporate Intangibles Research and Development Manual, gov.uk
- HMRC policy paper, Enhanced support for R&D intensive SMEs, gov.uk
Frequently asked questions
We are loss-making and do a lot of R&D. Do we get ERIS?
Only if you clear all three gates: you are an SME on the size test, you are loss-making before the extra R&D deduction, and your qualifying R&D spend is a large enough share of your total spend, counting connected companies. Plenty of genuinely R&D-heavy companies fail the last one once group spending is included.
What happens if our intensity dips for one year?
There is a one-year grace period: a company that met the intensity condition and made a valid claim in its previous 12-month accounting period can be treated as meeting it in the next one. It smooths a single unusual year, not a permanent change in shape.
Is the ERIS credit capped?
Yes. The payable amount is subject to a cap based on the company's PAYE and National Insurance, and under ERIS a claim for credit above the cap is invalid rather than carried forward, which makes getting the number right matter more.
If we become profitable, do we lose ERIS?
ERIS only applies where the company is loss-making before the additional deduction. A company that turns profitable claims under the merged scheme instead. That is normal and usually a good sign, not a penalty.