What is the ERIS scheme?

Enhanced R&D Intensive Support (ERIS) is part of the UK’s reformed R&D tax relief regime. It provides targeted relief for R&D-intensive, loss-making SMEs delivering approximately £500 million of additional support annually.

The aim is to help support smaller, highly innovative firms, particularly pre-profit startups that reinvest a large share of their expenditure in R&D but often face difficulties raising sufficient capital. ERIS maintains the more generous support of the former SME scheme for these companies, while other firms now claim under the merged scheme.

Eligibility

To qualify for ERIS, a company must:

• Be an SME (fewer than 500 staff, an annual turnover under £100 million or a balance sheet under £86 million).
• Be loss-making for tax purposes in the claim period (before R&D deductions).
• Meet the threshold: qualifying R&D expenditure must be at least 30% of total expenditure for the period.
  • (This replaced the earlier 40% threshold; 30% applies to periods starting on or after 1 April 2024.)
• Include all R&D and total costs across the company and its connected enterprises in the calculation.

Grace period: A company that qualified in the previous year may claim ERIS again even if it narrowly falls below the 30% threshold in the current year.

Companies that don’t meet the ERIS criteria, either because they’re profit-making or fall below the R&D intensity threshold, can still claim under the merged RDEC scheme.

From April 2024

The UK reformed its R&D tax relief system:

• The old SME and RDEC schemes merged into a single R&D credit system.
• ERIS remains as a special route for loss-making SMEs meeting the 30% intensity threshold, preserving some of the former SME scheme benefits (186% tax deduction and 14.5% cash credit).
• The R&D intensity threshold was reduced from 40% to 30%.
• Overseas R&D restrictions tightened: costs are only eligible if UK activity is not possible.

The new changes simplify the framework while directing additional support to R&D intensive start-ups.

In Summary

ERIS is a targeted enhancement within the UK’s reformed R&D tax credit system. From April 2024, it ensures that loss-making SMEs investing heavily in R&D continue to benefit from the generous support of the old SME scheme, while other firms move to the merged scheme.