FAQs on Enhanced R&D Intensive Scheme Claims

The Enhanced R&D Intensive Scheme (ERIS) supports loss-making SMEs in the UK that spend heavily on research and development. Starting 1 April 2024, businesses allocating at least 30% of their annual expenditure to R&D can claim a 14.5% payable tax credit, translating to about £27 for every £100 spent on qualifying R&D. This is more generous than standard schemes and aims to help SMEs in their growth phases.

Key Points:

• Eligibility: SMEs with at least 30% of total expenditure on R&D. Large companies are excluded.
• Qualifying Costs: Includes staffing, software, consumables, and subcontractor costs but excludes capital expenses, land, and patents.
• Claim Process: Submit an Additional Information Form (AIF) via HMRC before filing a Corporation Tax Return (CT600). First-time claimants must also notify HMRC.
• Deadlines: Claims must be submitted within 24 months of the accounting period's end.
• Benefits: A grace period allows companies to temporarily fall below the 30% threshold while maintaining eligibility.

This scheme simplifies access to R&D tax relief for focused businesses, helping them claim higher returns on innovation-related spending.

Eligibility Criteria for the Scheme

Who Can Apply?

The Enhanced R&D Intensive Scheme is designed exclusively for small and medium-sized enterprises (SMEs) that are loss-making. Large companies are not eligible and must instead use the merged R&D Expenditure Credit (RDEC) scheme. For this scheme, a company is considered loss-making if it shows a trading loss for tax purposes before factoring in additional R&D costs.

To qualify, your company must meet an intensity condition: at least 30% of its total expenditure must be relevant R&D expenditure for accounting periods starting on or after 1 April 2024. This calculation must also include the expenditure of any connected companies worldwide.

Some companies are automatically excluded. Those listed as ineligible under s.1142 CTA 2009, such as state-owned or tax-exempt entities, cannot apply. Additionally, SMEs in Northern Ireland may face specific sectoral restrictions and could be subject to de minimis limits depending on their trading activities.

What Expenditure Qualifies?

The scheme covers a range of R&D-related expenses, including:

• Staffing costs: Salaries, National Insurance contributions, pensions, and bonuses for employees directly involved in R&D.
• Software and cloud computing: Costs directly supporting research activities.
• Consumables: Items like power, fuel, and materials used during the research process.
• Externally provided workers (EPWs) and relevant subcontractor costs.

However, some costs are excluded. These include capital expenditure, as well as expenses related to land, rent, rates, patents, and trademarks. When calculating the 30% intensity threshold, you must exclude intra-group charges and amortisation addbacks from your total relevant expenditure.

Finally, the PAYE cap for claims is set at £20,000 plus 300% of the company's relevant PAYE and National Insurance contributions.

With eligibility and qualifying expenses outlined, the next section will guide you on how to prepare and calculate your claim.

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Preparing and Calculating Your Claim

How to Calculate Your Claim

To calculate your claim, start by adding up all qualifying R&D expenses, such as staffing costs, software, and consumables. From there, calculate two key figures: multiply the total by 86% to determine the additional relief deduction, and by 186% to find the enhanced expenditure.

If your company is loss-making, you can surrender the smaller amount between the enhanced expenditure and the post-deduction trading loss to claim a payable tax credit. This tax credit is worked out at 14.5% of the surrendered loss. For example, if your qualifying expenditure totals £100,000, the enhanced amount would be £186,000. This translates into a tax credit of £26,970 (£186,000 × 14.5%), though this may be limited by the PAYE cap.

It's crucial to ensure your calculations follow HMRC's guidelines. Keep in mind that these ERIS rates are applicable only if your accounting period begins on or after 1 April 2024. Additionally, you'll need to complete and submit the mandatory additional information form before including the relief claim in your Company Tax Return.

Required Documentation

Once you've calculated your claim, you'll need to gather the supporting documentation to back up your figures. Be sure to maintain clear and detailed records, such as payroll data, invoices, and contracts, for all qualifying costs. Your financial records should clearly separate R&D expenses from other business costs. Evidence like timesheets, project logs, and purchase orders is essential.

You'll also need to demonstrate compliance with the intensity threshold by showing R&D spending as a percentage of your total expenditure, including relevant figures from any connected companies worldwide. Keeping contemporaneous notes from project meetings, technical reports, and records of failed experiments can further substantiate the genuine uncertainty and innovation involved in your R&D activities.

Submission Deadlines and Procedures

When to Submit Your Claim

You have 24 months from the end of your accounting period to submit your claim. This two-year timeframe corresponds with the standard period allowed for amending Corporation Tax returns, as R&D tax credits fall under Corporation Tax relief. If you miss this deadline, you lose the ability to claim qualifying costs for that period.

It's crucial to submit the Additional Information Form (AIF) through HMRC's portal before filing your CT600. Filing the CT600 first could lead to your R&D claim being rejected or removed entirely. Emma Cooper from EasyDigitalFiling highlights the importance of this sequence:

These forms [Additional Information Form] will need to be submitted directly through HMRC's website before you submit the CT600 return itself.

For first-time claimants or companies that haven't made a claim in the past three years, an additional step is required: submitting a Claim Notification form to HMRC. Failing to complete this step could invalidate your entire claim.

Timing is everything when it comes to making the most of this scheme. Meeting these deadlines ensures compliance, so keep track of key dates to avoid missing out.

Important Dates

The Enhanced R&D Intensive Scheme applies to accounting periods starting on or after 1 April 2024. For these periods, the R&D intensity threshold is set at 30% of your total relevant expenditure. This is a reduction from the 40% threshold that applied to accounting periods beginning between 1 April 2023 and 31 March 2024.

If your company falls below the 30% intensity threshold due to changing circumstances, you may still qualify for a one-year grace period. This allows you to continue claiming the enhanced rate, provided you met the threshold in the preceding 12 months.

Getting Expert Help with Your Claim

Benefits of Working with R&D Tax Specialists

Navigating the complexities of R&D tax relief can be challenging. That's where R&D tax specialists come in - they help streamline the process and significantly improve the chances of a successful claim. These experts can identify all eligible expenditures, ensure your submission aligns with HMRC's strict guidelines, and often secure relief that's 20–30% higher for SMEs compared to claims prepared without professional assistance.

For companies heavily involved in R&D, the compliance workload can be overwhelming. Specialists meticulously check your projects against HMRC's criteria, such as the requirement to demonstrate an "advance in science or technology", and ensure all expenses are categorised correctly. This attention to detail makes a big difference: claims prepared with expert help have a 95% success rate, compared to just 70% for those filed independently. Without professional guidance, HMRC may reduce unassisted claims by as much as 50%.

How Zest R&D Tax Advisors Can Help

Zest R&D Tax Advisors provide a comprehensive service to ensure your claim is as effective as possible. Their expertise covers everything from drafting technical narratives and analysing eligible expenditure to calculating enhanced relief. For loss-making SMEs, this relief can amount to as much as 40p for every £1 spent. They also collaborate closely with your accountant, preparing technical reports and detailed schedules for your CT600 form.

Their process involves a five-stage audit: eligibility checks, expenditure mapping, technical narrative reviews, HMRC enquiry simulations, and final sign-off. Thanks to this thorough approach, Zest has achieved a 98% first-time approval rate for claims. They also assist with advance assurance applications, a critical step in ensuring your claim meets HMRC's requirements. With their support, you’ll be well-prepared to maximise your claim and move confidently into the next steps.

Summary

Key Benefits of the Scheme

The Enhanced R&D Intensive Scheme provides notable financial support for loss-making SMEs that prioritise research and development. It offers a 14.5% payable tax credit rate and a total deduction of 186% of qualifying expenditure (comprising 100% of eligible costs plus an additional 86% uplift). This translates into significant cash relief for eligible businesses. From 1 April 2024, the R&D intensity threshold will drop from 40% to 30%, allowing more R&D-focused businesses to benefit.

The scheme acknowledges that companies working on groundbreaking advancements often face early-stage losses and rewards their dedication to progress.

Next Steps for Your Business

To make the most of these benefits, follow these key steps to secure your claim:

• Check your eligibility: Ensure your business qualifies as an SME (fewer than 500 employees and either turnover ≤£100 million or gross assets ≤£86 million) and is loss-making before applying the enhancement.
• Calculate your intensity ratio: Confirm that your qualifying R&D expenditure accounts for at least 30% of your total relevant costs.

If you’re a first-time claimant or haven’t claimed in the last three years, submit a claim notification to HMRC. Alongside this, complete the Additional Information Form (AIF) as part of your Corporation Tax return. For small businesses making their first claim, applying for advance assurance with HMRC can provide confirmation that your R&D projects meet the required criteria.

Maintain thorough records of R&D activities and expenses, such as staff time, subcontractor invoices, and consumable costs. If your business met the intensity threshold in the previous 12 months but falls slightly short this year, you may still qualify for the intensive rate for one year under the grace period provision.

Given the detailed nature of the requirements and the potential to maximise your claim, collaborating with R&D tax specialists can help ensure your submission is both accurate and fully optimised.

How do I claim Research and Development tax relief?

FAQs

How do I work out my 30% R&D intensity ratio?

To work out your 30% R&D intensity ratio, take your R&D expenditure and divide it by your total expenditure. Then, multiply the result by 100. This calculation reveals the percentage of your overall costs allocated to R&D.

To be eligible for the Enhanced R&D Intensive Scheme, you need at least 30% of your total expenditure to be dedicated to R&D.

Can I still claim if I dip below 30% this year?

Possibly — but only under the one-year grace period. If your company qualified for and claimed ERIS in the previous accounting period, you can still claim ERIS this period even if your R&D intensity falls below 30%. If you did not qualify the previous year, dipping below 30% means you cannot use ERIS this year — you would claim under the merged R&D scheme instead. And if you remain below 30% for two consecutive periods, you revert to the merged scheme. (The intensity threshold is 30% of total relevant expenditure for accounting periods beginning on or after 1 April 2024; it was 40% for periods beginning on or after 1 April 2023.)

What records does HMRC expect to see for an ERIS claim?

When submitting an R&D claim, HMRC requires comprehensive records that link your costs directly to the R&D activities you’ve undertaken. These records should cover:

• Salaries: Include payroll details for staff involved in R&D.
• Materials: Track costs for items consumed during the project.
• Utilities: Document energy and water expenses used specifically for R&D.
• Software: Provide evidence of software purchases or subscriptions relevant to the work.
• Subcontractor Payments: Record payments made to third parties contributing to the R&D effort.
• Capital Expenditure: Highlight costs for equipment used exclusively for R&D.

In addition to financial records, a technical narrative is crucial. This should outline:

• The uncertainties your project aimed to resolve.
• The systematic approach used to overcome these challenges.
• The results achieved from the research.

All documentation must not only support your claim but also align with HMRC’s guidelines to avoid any discrepancies. Proper preparation here is key to ensuring your claim is robust and meets their standards.

Related Blog Posts

• Enhanced R&D Intensive Scheme: Success Stories
• R&D Tax Relief: Eligible Costs for ERIS Claims
• ERIS Regulation Changes 2026
• ERIS Compliance: R&D Intensity Condition Explained