Guidance

Research and Development (R&D) Tax Relief: Enhanced R&D intensive support for loss-making SMEs based in Northern Ireland

Find out if you can claim Enhanced R&D intensive support (ERIS) as a loss-making, small and medium enterprise (SME) based in Northern Ireland.

From:
HM Revenue & Customs
Published
18 March 2024
Last updated
30 October 2024 — See all updates

The Autumn Finance Bill 2024 makes provision for loss-making, R&D intensive, SMEs that have a registered office in Northern Ireland. These provisions take effect for claims made on or after 30 October 2024. Once the Finance Bill receives Royal assent the rules will be backdated to 30 October for claims made on or after that day — companies who wish to submit an ERIS claim between 30 October and Royal assent to the Finance Bill should contact HMRC for advice.

You can choose to opt out of these provisions if you’re a SME with a registered office in Northern Ireland and your business activities involve no trade in goods, and no relevant activities in relation to the electricity market. You can tell HMRC you want to opt out when you provide additional information to support your R&D claim.

If your company is affected by the provisions, you are not subject to the restrictions on relief for payments to overseas contractors or to providers of externally provided workers. You will be able to claim ERIS, subject to a rolling 3-year limit. Above this limit, R&D Expenditure Credit (RDEC) relief is available (to companies that meet the eligibility conditions) under the new merged scheme.

You should read this guidance if:

  • you are an SME claiming ERIS
  • your registered office is in Northern Ireland
  • you have either:
    • a trade in goods, or a trade which involves relevant activities in relation to the electricity market
    • no trade in goods, and your trade does not involve relevant activities in relation to the electricity market, but you have not decided to opt out by notifying HMRC

Who can opt out

You can opt out if your business activities involve:

  • no element of trade in goods
  • no relevant activities in relation to the electricity market

You’ll need to tell us when you provide additional information to support your R&D claim.

If you do this, the overseas restrictions will apply, but the limit on the amount of relief you can get in a rolling 3-year period will not apply.

Overseas restrictions

For affected companies, if you’re claiming under ERIS, the restrictions on relief for overseas spend on contracted out R&D and externally provided workers (included at s1138A Corporation Tax Act (CTA) 2009) do not apply.

The restrictions, which limit claims for this expenditure, with some exceptions, will apply for any residual amounts for which RDEC is claimed under the merged scheme.

What a trade in goods is

You have a trade in goods if any of your business activities involves any element of trading in goods.

If you are not sure, you should proceed on the basis that you are trading in goods.

Relevant activities in relation to the electricity market

Relevant activities are the production, transmission, distribution, supply, wholesale trading and cross-border exchange of electricity.

How much you can claim under ERIS

The rolling 3-year limit applies to the total additional relief received by the company under the ERIS scheme, plus any other de minimis aid received by companies in the group.

This amount must not exceed €300,000 (for most businesses).

There are lower limits for certain businesses, for example those whose main activity is in the agriculture or fisheries sectors. You can contact HMRC for advice, email [email protected] for more information.

De minimis aid means support provided under any of a number of EU regulations. The regulations are amended or replaced from time to time; at the time of publication of this guidance (30 October 2024), the following EU regulations are applicable:

The additional relief amount for an ERIS claim is the amount that the benefit of the claim under ERIS exceeds the benefit of an equivalent claim for R&D expenditure credit (RDEC) under the merged scheme.

To work out the additional relief you’ll need to:

  1. Add up all the benefit amounts from the claim.
  2. Then subtract the net value of the RDEC — that the company would have qualified for if the expenses had instead been claimed under Chapter 1A of Part 13 of the Corporation Tax Act (2009). This is the third amount covered in section 1042K of the Corporation Tax Act (2009), the initial amount of expenditure credit, minus the notional tax deduction.

You should include the following benefit amounts in the calculation:

  • the amount of R&D tax credit to which the company is entitled, and which it claims, for the period
  • any amounts by which the liability of any other company to pay corporation tax in the period is reduced by virtue of a loss that both:
    • arises as a result of the Chapter 2 relief obtained by the company for the period
    • is surrendered by the company to the other company under Part 5 or 5A of the Corporation Tax Act 2010 (surrender of relief between members of groups and consortia)
  • the amount by which the liability of the company to pay corporation tax in any future accounting period is reduced by any losses carried forward from the current period which arose from the ERIS claim

You should do this for ERIS claims made in any previous accounting period of the company that began on or after 1 April 2024, and ended within the period of 3 years ending with the final day of the accounting period in question.

To this  amount, you should then add the value of all other de minimis aid received in the same accounting periods by any company in the group, for example the amount of any grant which counts as de minimis aid.

If you are unsure whether or not an amount received is de minimis aid, you should ask the person or authority which provided the amount.

This should include any ERIS benefits received by any other group company, for example if another company also claims ERIS itself.

The resulting figure (all benefits, less RDEC) should not exceed the limit for the company (read the section “How much you can claim under ERIS”).

Claims for ERIS that go over this limit are not allowed. HMRC has the power to address inaccuracies in tax returns. If you submit an inaccurate claim, you may become liable for tax-geared penalties.

Relief you can get for expenditure that that you cannot claim for under ERIS

If there is any expenditure you cannot claim ERIS for, because it would take you over the limit, you may be able to claim RDEC for that under the new merged scheme, provided you satisfy its rules.

Read more information about Research and Development (R&D) tax relief: the merged scheme and enhanced R&D intensive support.

Updates to this page

Published 18 March 2024
Last updated 30 October 2024 + show all updates

  1. We have updated the guidance in line with the Autumn Finance Bill 2024 which makes provision for loss-making, R&D intensive, SMEs that have a registered office in Northern Ireland. These provisions take effect for claims made on or after 30 October 2024.

  2. Added Welsh translation. The paragraph cited from The Research and Development (R&D) Relief (Chapter 2 Relief) Regulations 2024 has been corrected to paragraph (3)(b) of regulation 2.

  3. First published.

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