Biomedical Catalyst Accelerator 2025
December 16, 2025

Enhanced R&D Intensive Support (ERIS): A Valuable Opportunity for Innovation-Driven SMEs

The UK’s R&D tax landscape has undergone significant change in recent years, with the introduction of the merged R&D scheme, shifts in credit rates, and tighter rules around eligible expenditure. But for some SMEs, there is better news, as HMRC has introduced Enhanced R&D Intensive Support (ERIS), a targeted incentive designed to ensure the most innovative small businesses are protected and rewarded for their investment in breakthrough technologies and development work.

If your business is heavily invested in R&D activity, ERIS may offer a substantially more generous cash benefit than the merged scheme. Below, we break down what ERIS is, who qualifies, and why it matters for innovation-driven SMEs.

What Is the ERIS Scheme?

ERIS is an enhanced form of R&D tax relief available to loss-making SMEs with high R&D intensity.

Its purpose is simple: support businesses where R&D is a major, foundational part of operations, particularly those in early-stage or pre-revenue phases that often struggle to raise capital.

Under ERIS, qualifying SMEs can access a 14.5% payable credit, leading to effective cash returns significantly higher than those available through the merged scheme.

Who Is Eligible?

To qualify for ERIS, a company must meet three key conditions:

  • Be an SME – Your company must fall within the SME definition for R&D tax purposes, which is fewer than 500 staff, and turnover below €100m or balance sheet under €86m.
  • Be Loss-Making – The definition of “loss-making” depends on your accounting period:
    For expenditure incurred on or after 1 April 2023 but within periods beginning before 1 April 2024, you must have a surrenderable R&D loss after enhancement.
    For periods beginning on or after 1 April 2024, you must have a tax loss before the R&D enhancement is applied.
  • Meet the R&D Intensity Threshold – This is the crucial factor. A business is considered R&D intensive if a minimum proportion of its total expenditure is spent on qualifying R&D.
    40% threshold – for expenditure incurred from 1 April 2023 (prior to APs starting on or after 1 April 2024).
    30% threshold – for accounting periods beginning on or after 1 April 2024.
  • Intensity ratio formula:
    R&D expenditure ÷ total relevant expenditure, combining the figures of the company and any connected companies. A one-year grace period prevents companies from slipping in and out of eligibility due to temporary fluctuations

Why ERIS Is Good News for SMEs

The merged R&D scheme, now the default for most companies, offers lower effective rates than the legacy SME scheme once did. For innovative small businesses that rely on cash credits to fund development, this shift created concern about reduced support. ERIS directly addresses this gap.

Key advantages of ERIS: ü Higher effective cash benefit than the merged scheme

  • Higher effective cash benefit than the merged scheme
  • 14.5% credit rate on losses surrendered
  • Protection for early-stage, R&D-driven businesses
  • Support for innovation during periods of high burn-rate and limited revenue
  • Grace period ensures consistent planning and protection from year-to-year volatility

By rewarding companies whose activity is genuinely centred around technological or scientific advancement, ERIS ensures the UK remains competitive in high-growth innovation sectors such as life sciences, biotech, aerospace, advanced materials, software development and green tech.

ERIS vs SME Scheme vs Merged Scheme: What’s the Difference?

Feature ERIS (for loss-making R&D-intensive SMEs) Legacy SME Scheme (limited availability) Merged Scheme (default for most companies)
Credit Rate
14.5% payable credit
10%–14.5% depending on period
20% RDEC-style credit, which is taxable on the business’ corporation tax rate.
Effective Cash Return
Up to roughly 27% (as per example)
Historically up to approximately 33%, now reduced
Typically, 10%–17% net
Eligibility
Loss-making SMEs meeting intensity threshold
SMEs only
SMEs and large companies
Purpose
Protect high-intensity innovators
Broad SME R&D support
Unified, simplified framework

In short:

  • If you’re an SME and don’t meet the intensity threshold, the merged scheme applies - and yields a lower benefit to the previous regime.
  • If you do meet the threshold, ERIS restores support to a much higher level.

Example: The Power of ERIS in Practice

  • £500k R&D Spend
  • £1m total expenditure
  • 40% intensity criteria met → Eligible for ERIS
  • Tax Loss: £750k
  • After enhancement and loss surrender:
  • Credit received: £134,850
  • Effective benefit: 27% of spend

Special Note for Northern Ireland Companies

For companies registered in NI, restrictions on overseas third-party R&D costs do not apply. However, ERIS claims become de minimis state aid, capped at €300,000 over three years. Businesses may opt out of the cap, but doing so reintroduces the overseas expenditure restrictions. This adds an extra layer of strategic planning for Northern Irish SMEs.

Why It’s Happening

The government recognises that R&D-intensive SMEs are powerful drivers of:

  • Innovation
  • Economic growth
  • Technological leadership
  • Early-stage job creation

ERIS is effectively a safeguard. As general SME relief has tightened, the most innovative companies are shielded from negative impact, ensuring they can continue pushing boundaries without financial disruption.

What SMEs Should Do Now

If your business invests heavily in R&D, now is the time to:

  • Assess your R&D intensity. Accurate calculation is essential and often more complex than it appears due to connected company rules and adjustments in expenditure.
  • Review your loss position. Different periods have different definitions of “loss-making” for ERIS.
  • Strengthen financial and technical records. Good documentation supports both eligibility and accurate claims.
  • Model the benefit difference. Understanding the benefit differences between ERIS and the merged scheme is critical for cashflow and investment decisions.

Final Thoughts

The introduction of the merged R&D scheme reduced the generosity of R&D tax relief for many SMEs, but ERIS ensures that those who need support most still receive meaningful, innovation-fuelling benefits.

For companies where R&D is a significant part of operations, ERIS represents a substantial opportunity: higher credit rates, improved cashflow, and protection from volatility.

If you think your SME might meet the R&D intensity threshold, now is the ideal time to explore eligibility and ensure you’re making the most of the relief available.