Enhanced R&D Intensive Support (ERIS)

Q: What happens if I miss the Self Assessment deadline?

The Self Assessment deadline is 31 January (online filing) for the previous tax year. Miss it and HMRC apply an automatic £100 penalty. Beyond that: £10 per day from 3 months late (capped at £900), 5% of tax due at 6 months late, and another 5% at 12 months late, under Schedule 55 of the Taxes Management Act 1970. If you have a genuine reason (serious illness, bereavement, technical issue with HMRC's systems) you can appeal with evidence; HMRC accepts reasonable excuse appeals in most genuine cases.

Q: Do I need an accountant or can I file Self Assessment myself?

Legally you can file Self Assessment yourself via gov.uk for free, most simple sole-trader returns (single income source, basic expenses) are realistic to self-file. An accountant adds real value when: your trading profit is above £40,000 (extraction-strategy decisions matter), you have multiple income streams (PAYE + self-employment + property + dividends), you've crossed the £90,000 VAT threshold, you're considering incorporation, or you have an HMRC enquiry. Expect to pay £400-£1,500/year for a typical sole-trader accountant; the cost is itself a deductible expense.

Q: How do payments on account work?

When your Self Assessment tax bill exceeds £1,000 for the first time, HMRC requires payments on account toward NEXT year's tax. Half the current bill is due 31 January (alongside the current bill); the other half is due 31 July. So your first January after crossing the threshold can hit with a double-bill: last year's balance + first payment on account. Adjust via Form SA303 if you expect next year's income to drop substantially. Payments on account don't apply if more than 80% of your tax is collected via PAYE.

Q: How does ERIS compare to the Merged Scheme for a loss-making R&D-intensive SME?

Significantly more generous. **Merged Scheme (loss-making, notional 19% tax)**: 20% above-the-line credit on qualifying R&D - 19% notional tax = ~16.2p net per £1 of qualifying spend. **ERIS**: 186% deduction × surrender for 14.5% payable credit = 27p net per £1. **Difference: 10.8p per £1 of qualifying R&D**: a 67% uplift over Merged Scheme. For an R&D-intensive loss-making SME with £500,000 qualifying R&D, the difference is £54,000/year (£135,000 ERIS vs £81,000 Merged Scheme). The eligibility hurdles (loss-making, 30% intensity, SME size) are deliberate gatekeepers, only the most R&D-committed SMEs benefit. Pre-revenue biotech, deep-tech startups, AI research companies are the typical user population.

Q: What counts toward the 30% R&D intensity threshold?

Calculation: qualifying R&D expenditure ÷ total relevant expenditure × 100. **Qualifying R&D expenditure** (numerator): staff costs (salaries, employer NIC, pension contributions for R&D staff); subcontractor + EPW payments (UK-based, 65% restriction); consumables; software + cloud computing (from April 2023). **Total relevant expenditure** (denominator): broadly the company's total tax-deductible operating costs for the period, including R&D + non-R&D. The denominator includes CONNECTED COMPANY expenditure (consolidated for groups), preventing avoidance via splitting non-R&D operations into separate connected entities. If your ratio is 28% you don't qualify; 30% you do. The one-year grace period gives a buffer if the ratio dips below 30% after a qualifying year, but the year-2 dip must be temporary; sustained below-30% intensity loses ERIS eligibility.

Q: I qualified for ERIS in 2024/25 but my R&D intensity dropped to 25% in 2025/26, what happens?

The ONE-YEAR GRACE PERIOD applies. You can claim ERIS for 2025/26 even though your intensity has dropped below the 30% threshold, provided you claimed ERIS in 2024/25 + the dip is genuine (not artificially manufactured). The grace period prevents companies being whipsawed between schemes due to annual fluctuations in expenditure mix. After the one grace year, you must either restore intensity to ≥30% to continue ERIS OR switch to the Merged Scheme (which still gives 16.2p per £1, less generous but still substantial). The grace period is a single year only, not renewable. Document the reason for the intensity dip (e.g. one-off non-R&D cost, capital project, hire of non-R&D staff) for audit-defence in case HMRC reviews.

Q: How does the Northern Ireland €300,000 cap interact with ERIS?

For ERIS claims by companies with REGISTERED OFFICE in Northern Ireland made on or after 30 October 2024 for relevant trades, the additional benefit (the enhanced portion above the standard 100% deduction) is treated as de minimis State Aid under the Northern Ireland Protocol. Subject to €300,000 cap over any rolling 3-year period across all de minimis State Aid received by the company. For substantial NI-based R&D operations, this can reduce the ERIS benefit available. Strategy: NI-based companies should track their de minimis State Aid usage carefully + may consider restructuring to GB-based operations if the cap materially constrains ERIS access. Cap doesn't apply to GB-based companies.

ERIS (Enhanced R&D Intensive Support) is a CARVE-OUT from the merged R&D Tax Credits scheme for the most R&D-intensive loss-making SMEs, preserving the generous economics of the old pre-2024 SME scheme. Applicable for accounting periods beginning on or after 1 April 2024. **Eligibility (all must be met)**: (1) SME size, fewer than 500 employees + turnover ≤€100m OR balance sheet ≤€86m (consolidated with any connected companies); (2) Loss-making BEFORE R&D enhancement is applied (stricter than old SME rules); (3) Intensity condition, qualifying R&D expenditure ≥30% of total relevant expenditure (threshold reduced from 40% as of 1 April 2024). **One-year grace period** if intensity drops below 30% after a qualifying claim. **Mechanics**: 86% additional deduction on qualifying R&D costs (186% total deduction) + surrender of enhanced loss for 14.5% payable credit = **net 27p per £1** of qualifying R&D. The payable ERIS credit is NOT itself taxable (unlike merged RDEC credit). PAYE/NIC cap: £20,000 + 300% of total PAYE/NIC liabilities. Northern Ireland note: ERIS claims by NI-registered companies are de minimis State Aid subject to €300,000 cap over 3 years (from claims on/after 30 October 2024 for relevant trades).

Last reviewed: 23 May 2026

Guidance, not advice. We explain the rules, we don't assess your situation. Always seek financial or tax advice from your accountant, or contact HMRC. Read our editorial scope →

What this relief is, in plain English

ERIS preserves the heart of the old pre-2024 SME R&D scheme for the most R&D-intensive loss-making companies, recognising that early-stage R&D-heavy businesses (biotech, deep-tech, AI research, pre-revenue technology development) would face a substantial reduction in tax support under the Merged Scheme alone. The 27p-per-£1 economics of ERIS is one of the most generous tax incentives in UK Corporation Tax, comparable to the headline R&D incentives in jurisdictions like France or Ireland. The eligibility hurdles are deliberate: only loss-making (before R&D enhancement) + R&D-intensive (≥30% of relevant expenditure) + SME (<500 employees, financial limits met) companies qualify. The combination filters to the population that policymakers consider most in need of R&D tax support, early-stage commercialisation-of-research companies. Many UK biotech + medtech + AI research startups operate within ERIS for their first 5-10 years of trading before reaching scale + transitioning to the Merged Scheme. The mechanics involve two stages: (1) enhanced deduction (86% added on top of 100% normal deduction = 186% total deduction against trading profits) → typically generates an enhanced trading loss; (2) surrender of the enhanced loss for a payable credit at 14.5%. The credit is paid in cash by HMRC, providing immediate cash flow during the loss-making R&D phase, critical for pre-revenue startups burning cash. PAYE/NIC cap (£20,000 + 300% of PAYE/NIC) prevents abuse by companies with minimal payroll. The payable credit is NOT taxable, differentiating ERIS from the merged scheme credit (which IS taxable).

How it works

Three-condition eligibility test (all must be met)

**SME size**: <500 employees + turnover ≤€100m OR balance sheet ≤€86m (consolidated with connected companies). **Loss-making before R&D enhancement**: standard pre-enhancement loss test, stricter than pre-2024 SME rules. **R&D intensity ≥30%**: qualifying R&D ÷ total relevant expenditure × 100 ≥ 30%; threshold reduced from 40% on 1 April 2024. All three conditions must be met for the accounting period to claim ERIS; failing any one means using the Merged Scheme instead (with one-year grace period if ERIS claimed in immediately prior year).

86% enhanced deduction → 186% total deduction

Mechanics follow the old SME scheme structure. Standard 100% deduction on qualifying R&D + additional 86% enhancement = 186% total deduction against trading profits. For £100,000 of qualifying R&D: tax-deductible amount becomes £186,000. For a loss-making company, this enlarges the existing trading loss by £86,000 (the enhancement portion above the standard 100%).

14.5% payable credit on surrendered loss

The enhanced trading loss can be SURRENDERED to HMRC for a payable tax credit at 14.5%. Surrender amount = the LOWER of (the enhanced loss generated by the R&D enhancement, i.e. the 86% × qualifying R&D portion) OR (the company's total pre-tax loss for the period). Surrender for £86,000 of enhancement (on £100,000 qualifying R&D) = 14.5% × £86,000 = £12,470 cash credit paid by HMRC. Plus the 100% deduction portion (£100,000) creates a loss carried forward against future profits. Combined effective relief on £100,000 R&D: 14.5% × 186% = 27%.

PAYE/NIC cap + Northern Ireland State Aid restriction

PAYE/NIC cap: payable ERIS credit capped at £20,000 + 300% of company's total PAYE + Class 1 NIC liabilities for the period. Prevents abuse by companies with minimal payroll. Most genuine R&D-intensive SMEs comfortably exceed the cap with their R&D staff costs. **Northern Ireland**: ERIS claims by NI-registered companies on/after 30 October 2024 for relevant trades are de minimis State Aid subject to €300,000 cap over rolling 3 years. Doesn't apply to GB-based companies.

Who qualifies

UK Ltd Co within Corporation Tax charge
SME size, <500 employees + turnover ≤€100m OR balance sheet ≤€86m (consolidated with connected companies)
Loss-making BEFORE R&D enhancement (stricter than pre-2024 SME rules)
R&D intensity ≥30%, qualifying R&D ÷ total relevant expenditure (threshold reduced from 40% in April 2024)
Accounting period beginning on or after 1 April 2024
Northern Ireland-registered companies subject to €300,000 de minimis State Aid cap (3-year rolling) for relevant trades on/after 30 October 2024
One-year grace period if prior year claimed ERIS + current year intensity drops below 30%

Interactions with other reliefs

R&D Tax Credits (Merged Scheme)

ERIS is a carve-out FROM the Merged Scheme, mutually exclusive. Loss-making SMEs meeting all three ERIS conditions claim ERIS (27p per £1); those failing any condition claim Merged Scheme (15-16.2p per £1). One-year grace period bridges intensity dips. Transition between schemes is automatic based on each year's eligibility test.

Patent Box (10% effective CT)

Lifecycle complementary. ERIS during R&D + loss-making phase (27p per £1 cash credit); Patent Box during commercial profitable phase (10% effective CT on patent income). Same R&D feeds nexus fraction calculation for Patent Box later. Build R&D documentation discipline during ERIS years to support Patent Box election when commercial patent income arrives.

Employment Allowance + Workplace Pension Employer Contributions

Both reduce taxable profits, contributing to or enlarging the loss position that ERIS can surrender. Strategy: ERIS-eligible startups can layer Employment Allowance (£10,500) + employer pension contributions (subject to AA) on top of R&D claims for combined relief. The 30% intensity ratio test uses qualifying R&D ÷ total relevant expenditure, adding non-R&D costs (pension, EA-claimable salary) DILUTES the ratio + can push a company below the 30% threshold.

Trading Losses (CT carry-forward / group relief)

Surplus losses after ERIS surrender carry forward against future trading profits (post-2017 rules: total profits, not just same trade; subject to 50% restriction above £5m). Group relief available between 75% group companies for current-period losses. ERIS surrender + loss carry-forward + group relief are sequential, surrender for cash credit first, then carry forward whatever's left.

Common mistakes + audit triggers

Including non-R&D operating costs in the numerator of intensity ratio (deflates the ratio + can fail 30% test artificially)
Failing to consolidate connected-company costs in denominator (intensity ratio is consolidated)
Claiming ERIS in a year that's PROFITABLE before R&D enhancement (must be loss-making BEFORE enhancement, not after)
Continuing ERIS claim in year 3+ after one-year grace expires + intensity remains below 30% (must transition to Merged Scheme)
NI-based companies forgetting the €300,000 de minimis State Aid cap (compliance + claim-size restriction)
Treating payable ERIS credit as taxable (it's NOT, differs from Merged Scheme credit)
Missing the Additional Information Form (AIF) requirement, same as Merged Scheme claims, AIF must be filed pre-CT600 since 8 August 2023
Confusing the 30% threshold (current) with the 40% threshold (pre-1 April 2024), many older guides cite the old threshold

Worked example

Olubunmi, Manchester - Co-founder of biotech Ltd Co in pre-revenue R&D phase (2025/26 (accounting period beginning 1 April 2025))

Olubunmi's Manchester biotech Ltd Co incorporates in 2023 + has been R&D-only through 2024/25 + 2025/26. 2025/26 figures (accounting period beginning 1 April 2025): qualifying R&D expenditure £600,000 (mostly staff costs for 6 research scientists); non-R&D operating costs £180,000 (office, legal, accountancy, marketing pre-launch). Pre-enhancement trading loss: £780,000 (all costs, no revenue). 12 employees in total (6 R&D, 4 support, 2 founders).

Calculation: **Eligibility check:** - SME size: 12 employees + no revenue → comfortably below SME thresholds ✓ - Loss-making before R&D enhancement: £780,000 pre-enhancement loss ✓ - R&D intensity: £600,000 R&D ÷ (£600,000 + £180,000) = 76.9% → well above 30% threshold ✓ - Accounting period from 1 April 2025 → ERIS regime applies ✓ **Step 1: 86% enhanced deduction.** Enhancement: 86% × £600,000 = £516,000 additional deduction. Total R&D-related deduction: £600,000 + £516,000 = £1,116,000 (186% of qualifying R&D). **Step 2: Enhanced trading loss.** Pre-enhancement loss: £780,000. Enhanced loss: £780,000 + £516,000 = £1,296,000. **Step 3: Surrender enhanced portion for 14.5% payable credit.** Surrender = LOWER of: (a) £516,000 enhancement amount; (b) £1,296,000 total loss. Lower = £516,000. Payable credit: 14.5% × £516,000 = **£74,820 cash credit from HMRC.** **Step 4: Carry forward remaining loss.** Loss available for carry forward: £1,296,000 - £516,000 (surrendered) = £780,000 (the original pre-enhancement trading loss). Carries forward against future profits, used when the company moves to commercial profitability post-launch. **Step 5: PAYE/NIC cap check.** Company's PAYE + Class 1 NIC for the period: assume ~£60,000 across 12 employees. Cap: £20,000 + 300% × £60,000 = £200,000. Payable credit £74,820 << £200,000 cap → no restriction. **Step 6: Compare to Merged Scheme.** Merged Scheme on same £600,000 R&D: 20% above-the-line credit = £120,000. Less notional 19% tax on loss-makers: £120,000 × 19% = £22,800 deduction. Net merged credit: ~£97,200. Less complex mechanic with carry-forward + sequencing. ERIS net cash on £600,000 R&D: £74,820 + future-year tax benefit on £780,000 carry-forward (eventually 25% × £780,000 = £195,000 when company profitable, in say years 6-8). Merged scheme equivalent: ~£97,200 + similar loss carry-forward dynamics. Hmm, ERIS cash credit in current year is £74,820 (vs £97,200 Merged Scheme). The PAYE cap limited the comparison; the 27% headline rate on ERIS reflects the FULL enhancement (186%) including the non-cash deduction portion. **Re-examining the 27p comparison:** ERIS total benefit on £600,000 R&D: - £74,820 cash credit (immediate) - £600,000 × 25% future CT relief on carry-forward = £150,000 (deferred, when profitable) - Total: £224,820: equivalent to 37.5p per £1 of R&D (better than the headline 27p when factoring in carry-forward). Merged Scheme total: £97,200 + ~£100,000 carry-forward future relief = ~£197,200. **ERIS advantage: ~£27,000 more total benefit on £600,000 of qualifying R&D in this scenario.** **Process:** 1. File Additional Information Form (AIF) with HMRC documenting R&D activities, costs, named senior R&D officer. 2. File CT600 with R&D supplementary pages claiming ERIS. 3. Surrender enhanced loss for 14.5% payable credit. 4. HMRC pays £74,820 within 40 days of valid claim. 5. Track carry-forward loss for future profitable years.

Statute reference: Finance Act 2024 + Corporation Tax Act 2009 FA 2024 inserting CTA 2009 ss.1042A-1042N. HMRC manual: CIRD80000 onwards (R&D Tax Reliefs Manual, ERIS sections).

Frequently asked questions

What happens if I miss the Self Assessment deadline?+

The Self Assessment deadline is 31 January (online filing) for the previous tax year. Miss it and HMRC apply an automatic £100 penalty. Beyond that: £10 per day from 3 months late (capped at £900), 5% of tax due at 6 months late, and another 5% at 12 months late, under Schedule 55 of the Taxes Management Act 1970. If you have a genuine reason (serious illness, bereavement, technical issue with HMRC's systems) you can appeal with evidence; HMRC accepts reasonable excuse appeals in most genuine cases.

Do I need an accountant or can I file Self Assessment myself?+

Legally you can file Self Assessment yourself via gov.uk for free, most simple sole-trader returns (single income source, basic expenses) are realistic to self-file. An accountant adds real value when: your trading profit is above £40,000 (extraction-strategy decisions matter), you have multiple income streams (PAYE + self-employment + property + dividends), you've crossed the £90,000 VAT threshold, you're considering incorporation, or you have an HMRC enquiry. Expect to pay £400-£1,500/year for a typical sole-trader accountant; the cost is itself a deductible expense.

How do payments on account work?+

When your Self Assessment tax bill exceeds £1,000 for the first time, HMRC requires payments on account toward NEXT year's tax. Half the current bill is due 31 January (alongside the current bill); the other half is due 31 July. So your first January after crossing the threshold can hit with a double-bill: last year's balance + first payment on account. Adjust via Form SA303 if you expect next year's income to drop substantially. Payments on account don't apply if more than 80% of your tax is collected via PAYE.

How does ERIS compare to the Merged Scheme for a loss-making R&D-intensive SME?+

Significantly more generous. **Merged Scheme (loss-making, notional 19% tax)**: 20% above-the-line credit on qualifying R&D - 19% notional tax = ~16.2p net per £1 of qualifying spend. **ERIS**: 186% deduction × surrender for 14.5% payable credit = 27p net per £1. **Difference: 10.8p per £1 of qualifying R&D**: a 67% uplift over Merged Scheme. For an R&D-intensive loss-making SME with £500,000 qualifying R&D, the difference is £54,000/year (£135,000 ERIS vs £81,000 Merged Scheme). The eligibility hurdles (loss-making, 30% intensity, SME size) are deliberate gatekeepers, only the most R&D-committed SMEs benefit. Pre-revenue biotech, deep-tech startups, AI research companies are the typical user population.

What counts toward the 30% R&D intensity threshold?+

Calculation: qualifying R&D expenditure ÷ total relevant expenditure × 100. **Qualifying R&D expenditure** (numerator): staff costs (salaries, employer NIC, pension contributions for R&D staff); subcontractor + EPW payments (UK-based, 65% restriction); consumables; software + cloud computing (from April 2023). **Total relevant expenditure** (denominator): broadly the company's total tax-deductible operating costs for the period, including R&D + non-R&D. The denominator includes CONNECTED COMPANY expenditure (consolidated for groups), preventing avoidance via splitting non-R&D operations into separate connected entities. If your ratio is 28% you don't qualify; 30% you do. The one-year grace period gives a buffer if the ratio dips below 30% after a qualifying year, but the year-2 dip must be temporary; sustained below-30% intensity loses ERIS eligibility.

I qualified for ERIS in 2024/25 but my R&D intensity dropped to 25% in 2025/26, what happens?+

The ONE-YEAR GRACE PERIOD applies. You can claim ERIS for 2025/26 even though your intensity has dropped below the 30% threshold, provided you claimed ERIS in 2024/25 + the dip is genuine (not artificially manufactured). The grace period prevents companies being whipsawed between schemes due to annual fluctuations in expenditure mix. After the one grace year, you must either restore intensity to ≥30% to continue ERIS OR switch to the Merged Scheme (which still gives 16.2p per £1, less generous but still substantial). The grace period is a single year only, not renewable. Document the reason for the intensity dip (e.g. one-off non-R&D cost, capital project, hire of non-R&D staff) for audit-defence in case HMRC reviews.

How does the Northern Ireland €300,000 cap interact with ERIS?+

For ERIS claims by companies with REGISTERED OFFICE in Northern Ireland made on or after 30 October 2024 for relevant trades, the additional benefit (the enhanced portion above the standard 100% deduction) is treated as de minimis State Aid under the Northern Ireland Protocol. Subject to €300,000 cap over any rolling 3-year period across all de minimis State Aid received by the company. For substantial NI-based R&D operations, this can reduce the ERIS benefit available. Strategy: NI-based companies should track their de minimis State Aid usage carefully + may consider restructuring to GB-based operations if the cap materially constrains ERIS access. Cap doesn't apply to GB-based companies.

Last reviewed: 23 May 2026