How it's calculated
For accounting periods beginning on or after 1 April 2024, UK R&D tax relief has two routes. The merged scheme gives most companies an expenditure credit of 20% of qualifying R&D costs; the credit counts as trading income, so it is taxed. Enhanced R&D intensive support (ERIS) is for loss-making SMEs whose relevant R&D is at least 30% of total expenditure: they deduct an extra 86% of their R&D costs and can swap the resulting loss for a payable credit of up to 14.5%.HM Revenue & Customs A company cannot claim both on the same expenditure, so the calculator works out each and shows which is worth more.
The formula
Merged scheme
- Credit = qualifying expenditure × 20%
- Profitable company: benefit = credit − the extra Corporation Tax on it (25% at the main rate, 19% for small profits, Marginal Relief in between)
- Loss-making company: benefit = credit − notional tax at 19%, up to the PAYE cap
ERIS (HMRC's calculation steps)HM Revenue & Customs
- Additional deduction = qualifying expenditure × 86%, which increases the trading loss
- Surrenderable loss = the lower of 186% of the qualifying expenditure and the unrelieved trading loss (after setting it against other profits of the period)
- Payable credit = surrenderable loss × 14.5%, up to the PAYE cap; it is not taxable
PAYE cap = £20,000 + 300% of the company's PAYE and NIC liabilities for the period.
Worked example
HMRC's own example: a company with £100,000 of qualifying expenditure and a £50,000 trading loss claims the £86,000 additional deduction, giving a £136,000 loss. It surrenders the lower of £186,000 and £136,000, for a credit of £19,720. Under the merged scheme the same company would receive £16,200.
| Line | Merged RDEC | ERIS |
|---|---|---|
| Qualifying R&D expenditure | £100,000 | £100,000 |
| Expenditure credit (20%) | £20,000 | £0 |
| Notional tax (19%) | -£3,800 | £0 |
| Additional deduction (86%) | £0 | £86,000 |
| Surrenderable loss | £0 | £136,000 |
| Payable credit (14.499999999999998%) | £0 | £19,720 |
| Benefit | £16,200 | £19,720 |
A profitable company with £200,000 of taxable profit and the same R&D spend gets £14,700 from the merged scheme after Corporation Tax on the credit.
Assumptions and limitations
- Qualifying expenditure is your figure. The calculator does not check which costs qualify or apply the overseas restrictions.
- Simplified merged-scheme steps. The full set-off order (against Corporation Tax, other periods and group companies) is condensed into profit or loss; companies close to break-even should check with an adviser.
- ERIS assumes the whole loss is surrendered after setting it against other profits of the same period; you can choose to carry losses forward instead.
- The PAYE cap uses the liabilities you enter; some companies are exempt.