Quick answer, reviewed 11 October 2026
For accounting periods beginning on or after 1 April 2024, qualifying companies consider merged RDEC or, if eligible, Enhanced R&D Intensive Support (ERIS). Merged RDEC is a taxable 20% credit. ERIS offers eligible loss-making, R&D-intensive SMEs an 86% additional deduction and a credit of up to 14.5% of surrenderable losses. A project, its costs and the claim procedure must all qualify.
The accounting period determines the scheme
The April 2024 reform does not simply apply to every invoice dated after 1 April 2024. The merged R&D expenditure credit and ERIS rules apply to accounting periods beginning on or after that date. Earlier periods can fall under the former SME or RDEC rules. Confirm the period first, especially when amending an older Corporation Tax return.
Relief is available to companies within the scope of Corporation Tax that meet the relevant conditions. It is not a general grant for any innovative business idea. See HMRC's current scheme guidance for the scheme choice, rates and payment mechanics.
What is qualifying research and development?
The project must seek an advance in science or technology and involve scientific or technological uncertainty that a competent professional could not readily resolve. The advance needs to concern the overall field, rather than knowledge that is merely new to your own company. A commercial success is not necessary, but evidence of the qualifying technical work is.
Software, manufacturing, materials and engineering projects can qualify when those tests are met. Routine configuration, adapting an existing website, ordinary product design and work driven only by commercial uncertainty do not automatically qualify. Describe the technical baseline, the intended advance, the uncertainty and the work performed to resolve it. See HMRC's definition and eligibility guidance.
A useful project file includes design notes, experiments, failed approaches, dates and an explanation from the relevant competent professional. It should distinguish the qualifying development stage from market research, customer onboarding and ongoing maintenance. This makes the cost allocation easier to explain later.
Merged RDEC: gross credit versus net benefit
The merged scheme gives a gross expenditure credit of 20% of eligible costs. The credit is taxable and goes through a prescribed payment process. It can be used against liabilities and may be affected by the PAYE/NIC cap and other restrictions. A headline gross credit is therefore not the same as an immediate cash repayment.
For illustration, £100,000 of qualifying expenditure produces a £20,000 gross credit. If the tax on that credit is 25%, the resulting amount is £15,000 before other restrictions or offsets. This is an illustrative 15% net calculation; a company's actual rate, losses and liabilities can change the outcome.
ERIS for eligible loss-making SMEs
ERIS requires a qualifying loss-making SME and R&D intensity of at least 30%, measured under the scheme's expenditure rules. Connected-company expenditure and the grace-period provisions can affect that test. Being a startup, or spending heavily on development, is not by itself enough.
The additional deduction is 86% of qualifying costs, on top of the normal 100% deduction. An eligible company can surrender qualifying losses for a credit of up to 14.5%. Multiplying 186% by 14.5% gives 26.97% of qualifying expenditure, but that is a possible maximum under the relevant loss assumptions, not a flat 27% credit for every intensive SME.
Check loss availability and the payment cap before quoting a repayment. The schemes cannot both be claimed on the same expenditure. Companies registered in Northern Ireland should also review the specific ERIS rules in the HMRC guide.
Which costs need review?
- Staff: eligible salary, employer NIC and pension costs attributable to qualifying work.
- Software, data and cloud computing: eligible costs used for the R&D, with suitable apportionment.
- Consumables: eligible materials and utilities consumed or transformed in the project.
- Externally provided workers: assess the arrangements and statutory conditions rather than treating all freelance invoices alike.
- Contracted R&D: identify which party is entitled to claim under the contract and the scheme rules.
For eligible payments to an unconnected contractor, a 65% qualifying proportion can apply. This was not a general change from 100% introduced to reduce abuse. Connected-party calculations and the entitlement to claim are different issues. Do not include every subcontractor payment merely because the underlying project sounds technical.
Restrictions apply to some overseas contractor and externally provided worker costs, with narrow exceptions. Cost or availability of workers alone is not enough to establish an exception. Check where the activity occurred, the contractual facts and the evidence. See HMRC's qualifying-cost guidance.
Claim notification and the additional information form
A claim notification may be needed for periods beginning on or after 1 April 2023, including some first-time and infrequent claimants. The deadline is generally six months after the end of the period of account, which is not always the same as a Corporation Tax accounting period. Previous claims and their submission dates can affect whether notification is required. Check HMRC's notification rules early.
An additional information form is required for claims submitted from 8 August 2023. Submit it before the Company Tax Return containing the claim; submitting both on the same day still requires the correct order. It includes company and contact details, project descriptions and expenditure information. An ordinary tax return attachment does not replace it. See the additional information requirements.
Prepare a defensible claim
Start with the technical assessment, then map costs to qualifying activities and check the scheme and procedural deadlines. Reconcile the calculation with payroll, supplier invoices and the accounts. Record why any apportionment is reasonable and identify excluded activities explicitly.
Before filing, review the claim with the people who carried out the work. They should be able to explain the advance and uncertainty in their own field. Retain the submission evidence and supporting files. A well-supported claim can still be checked by HMRC, so the objective is an accurate, evidenced return rather than a promised approval.
Frequently asked questions
Is the merged RDEC rate a tax-free 20% repayment?
No. The merged RDEC is a taxable 20% gross expenditure credit. Tax, liabilities, the payment process and caps affect the net benefit and cash payment.
Does ERIS pay every eligible SME 27% of R&D costs?
No. ERIS gives an 86% additional deduction and a credit of up to 14.5% of surrenderable losses. The possible 26.97% expenditure benefit depends on sufficient qualifying losses and other conditions.
When is an R&D claim notification due?
Where required, it is generally due six months after the end of the period of account. Eligibility for the notification exceptions and the separate additional information form should also be checked.
Reviewed against the linked primary sources on 11 October 2026. This guide gives general information; the tax treatment depends on your circumstances and the relevant tax or accounting period.
For support with your records and calculations, see our corporation tax service or contact Angel Accountancy to discuss your requirements.