| Applies to | accounting periods from 1 April 2024 |
| Merged scheme (RDEC) | 20% of qualifying costs as a taxable credit |
| ERIS | 186% deduction and a payable credit of up to 14.5% of the loss, for loss-makers with at least 30% R&D intensity |
| Overseas costs | contractors and externally provided workers abroad generally do not qualify |
| Budget 2026 | claim notification form goes for claims from 1 April 2027 (announced) |
What R&D means and why it concerns you
In UK tax law, R&D means a project seeking an advance in science or technology. It need not happen in a lab; what counts is the project's aim, not the room. Relief runs through the UK company's corporation tax, not as a grant.
For businesses abroad the topic usually becomes relevant when they have a UK subsidiary with its own development team. The relief goes to the UK company subject to UK corporation tax. A parent abroad cannot claim it itself.
Merged scheme and ERIS: the two routes since 2024
For accounting periods from 1 April 2024 these two routes replace the former split between large companies (RDEC) and small and medium-sized ones (SME scheme). Qualifying costs are the same in both; the calculation is not.
| Merged scheme (RDEC) | ERIS (enhanced R&D intensive support) | |
|---|---|---|
| Who | any trading company within corporation tax | small and medium-sized loss-makers with at least 30% R&D share of total expenditure |
| What | a credit of 20% of qualifying costs | an extra 86% deduction (186% in total) and a payable credit of up to 14.5% of the surrendered loss |
| Tax treatment | the credit is taxable income | the payable credit is tax-free |
| Cap | PAYE cap: £20,000 plus 300% of PAYE and NIC; excess carried forward | PAYE cap as left |
HMRC: R&D tax relief, the merged scheme and enhanced R&D intensive support (November 2026)
What you end up with
Under the merged scheme the company gets 20 percent of its qualifying costs as a credit. Because the credit itself is taxed as income, a company paying the 25 percent main rate is left with relief of 15 percent of the costs.
ERIS is for a small group: small and medium-sized companies with a tax loss before the extra deduction, where at least 30 percent of all expenditure goes on research and development. They can deduct their costs at 186 percent and surrender the loss for a tax-free payable credit of up to 14.5 percent. A company eligible for ERIS may still choose the merged scheme, just not both for the same costs.
The PAYE cap is why the relief is tied to real jobs in the UK: the credit is capped at £20,000 plus three times the company's PAYE and National Insurance. A company without UK payroll hits that limit quickly.
Since 2024, payments to contractors for research carried out abroad, and costs of externally provided workers whose pay is not subject to UK PAYE, generally do not qualify under the merged scheme or ERIS. So if the UK subsidiary engages the parent's development department abroad, those costs fall out. The exception is narrow: it only applies where the conditions for the research are not present in the UK and it would be wholly unreasonable to replicate them there.
How the claim works
The claim is made with the UK company's corporation tax return. Two forms come before it.
- 1
Notify in advance if claiming for the first time
First-time claimants, or those after a long gap, must file the claim notification form. The deadline is 6 months after the end of the accounting period. Miss it and you have no valid claim. Companies that claimed in the previous three years usually need not notify.
- 2
Submit additional information
Before the claim in the tax return, the company files the additional information form with details of projects and costs.
- 3
Claim in the tax return
The relief is claimed in the corporation tax return.
- 4
Optional: advance assurance
Small and medium-sized companies claiming for the first time can get HMRC to confirm the claim in advance; the assurance covers the first three accounting periods.
Under Budget 2026 the claim notification form goes for all claims from 1 April 2027, and the additional information form is to be slimmed down from autumn 2027. Until then today's deadlines apply. If you are claiming for the first time for a period ending in 2026, you must still meet the six-month notification deadline.
Frequently asked questions about R&D tax relief
Does the old SME scheme still exist?
Only for accounting periods that began before 1 April 2024. After that the merged scheme and ERIS apply.
Can our parent company abroad get the relief?
No. Only a company subject to UK corporation tax can claim. And work commissioned by the UK subsidiary from the parent abroad has generally not qualified since 2024.
Is it worth it for a loss-making start-up?
Often yes: R&D-intensive loss-makers can choose ERIS and surrender their loss for a tax-free payable credit. If you are also looking for capital from UK investors, know EIS and SEIS.
Sources: HMRC: R&D tax relief, the merged scheme and enhanced R&D intensive support; HMRC: Work out your Research and Development tax relief; HMRC Manual CIRD150500: overseas restrictions; HMRC: Tell HMRC you want to claim R&D tax relief; HMRC: R&D tax relief advance assurance; GOV.UK: R&D Tax Reliefs, improving the customer experience (Budget 2026)
