For accounting periods beginning on or after April 2024, businesses have been able to claim R&D Tax Credits through one of two routes: the merged Research and Development Expenditure Credit (RDEC) scheme or Enhanced R&D Intensive Support (ERIS) for loss-making SMEs.
ERIS provides a higher level of support to innovative loss-making SMEs by boosting the relief they can claim if their R&D expenditure comprises at least 30% of their total spending. Under ERIS, qualifying businesses benefit from an additional 86% deduction alongside the usual 100% (for a total of 186%), and have the option of surrendering their R&D-related trade loss for a 14.5% tax credit.
How is ERIS Different for Northern Ireland SMEs?
Essentially, loss-making R&D-intensive SMEs with a registered office in Northern Ireland have their own set of rules. That’s because, in order to comply with the Northern Ireland protocol (signed in the aftermath of Brexit, which sets out unique trade rules for Northern Ireland), there is a restriction on enhanced R&D intensive support for companies in NI.
The extra benefit a NI company would receive under the ERIS scheme is capped. They would benefit from the ERIS scheme’s higher relief up to a rolling 3-year cap of €300,000. Once the cap has been reached, companies will be able to continue claiming under the usual merged scheme.
Also of note is that NI-based companies will still be able to claim overseas R&D spend in R&D claims, unlike the rest of the UK.
What Counts Towards This Limit?
For ERIS R&D claims, the value of the credit above and beyond what the value would have been if the company had claimed under the merged RDEC scheme counts toward the limit. The benefit a company receives under ERIS cumulates with other sources of relevant aid towards a rolling three-year limit.
How Will This Affect Clients?
Clients looking to claim R&D will need to establish:
- If they are NI-based, do the NI ERIS rules apply to them?
- Are they R&D intensive?
- What is the value of the claim over and above the merged RDEC scheme?
- What other sources of relevant aid (grants etc) might also count towards the cap?
- A record of their rolling 3 year benefit.
Note: that if a company hits the cap, they can still make non-R&D intensive claims.
In Conclusion…
These changes can be complex, and with HMRC’s increased focus on compliance, it’s important to get your R&D tax claims right from the start. If you think these rules may affect your business, we recommend seeking advice from reputable, experienced professionals to ensure you stay compliant and make the most of the relief on offer.
Contact us here for further information.
