Intensive R&D Support for SMEs: Introducing ERIS

ERIS explained: Intensive Support for some loss making SMEs

🚀 Enhanced Research & Development Intensive Support (ERIS) is the R&D tax credit incentive designed to boost innovation for some loss-making SMEs, by paying out a higher Research & Development incentive.

In the video, we break down the essential things you need to know about ERIS.

Maximum Tax Credit

Using the ERIS claim calculation method (which is done in the tax computation), qualifying SMEs can claim up to 27% of their relevant R&D costs, as a cash payment. While under RDEC (Research & Development Expenditure Credit) the claim value is around 15% to 16% of relevant expenditure.

Eligibility Criteria for ERIS (applicable for accounting periods starting from 1st April 2024)

1. The company must have a trading loss in the relevant accounting period (before the R&D claim).

2. The company must meet the R&D intensity condition: which is that at least 30% of all expenditure was spent on qualifying R&D, in the accounting period for which the R&D claim is being made (40% for any costs claimed from 1st April 2023 until a new accounting period it started after 1st April 2024).

It is impiortant to note that the R&D Intensity test is calculated on aggregated worldwide connected linked/partner enterprises, which means that even the income and expenses of overseas companies’ must be taken into account.

When calculating whether a company is loss making, it is only the tax computation of the UK comany that is claiming R&D incentives that needs to show a loss before the R&D claim is calculated to pass the ERIS loss making test. 

However the R&D Intensity test is calculated on aggregated worldwide linked/partner enterprises, so overseas companies’ income andexpenses must be taken into account.

ERIS vs. RDEC

Using the ERIS claim calculation method, is not always the right choice, even when you qualify, as sometimes RDEC will give a greater benefit than ERIS, so calculating the best option is crucial.

Generally, where a company has a loss, before the R&D claim is calculated, that is equal to or greater than their qualify R&D expenditure, the maximum level of benefit, at around 27% of qualifying R&D costs, will be available. Where the loss is less than 25% of their qualifying R&D expenditure, RDEC is likely to be more beneficial, even if the company qualifies for ERIS.

Here is a link to the government new RDEC manual for ERIS

Visit Claiming RDEC Index Page.