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

SMEsYou can choose to opt out of these provisions if you’re a SME with a registered office in Northern Ireland whoseand your business activities involve no element of trade in goods, and no relevant activities in relation to electricity,the electricity market. You can choosetell HMRC you want to opt out ofwhen theseyou provisionsprovide additional byinformation notifyingto HMRC.support your R&D claim.

AffectedIf companiesyour company is affected by the provisions, you are not subject to the restrictions foron relief onfor payments to overseas contractors or to providers of externally provided workers,workers. andYou will be able to claim enhanced R&D intensive support (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.

ThisYou guidanceshould appliesread tothis youguidance if:

• you are aan small and medium enterprise (SME) claiming 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 electricity,the electricity market, but you have not decided to opt out by notifying HMRC under paragraph (3)(b) of regulation 2

Who can opt out

IfYou can opt out if your business activities involve involve:

• no element of trade in goods, and goods
• no relevant activities in relation to electricity,the youelectricity canmarket

You’ll optneed outto bytell notifyingus HMRC in writing under paragraph (3)(b) of regulation 2. You can do this when you provide provide additional information to support your your R&D claim claim.

If you do this, the overseas restrictions will apply, but the limit on the amount of relief obtainableyou 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 out R&D and and externally provided workers (included at s1138A Corporation Tax Act (CTA) 2009) do not applyapply.

The forrestrictions, thewhich purposeslimit ofclaims anyfor claimthis underexpenditure, ERIS.with Thesome restrictionsexceptions, 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 generation,production, transmission, distribution, supply, wholesale trading and cross-border exchange of electricity.

How much you can claim under under ERIS

The rolling 3-year limit applies to the nettotal benefitadditional ofrelief allreceived claimsby madethe company under the ERIS overscheme, plus any periodother ofde 3minimis years,aid onreceived aby rollingcompanies basisin (‘thethe relevant net benefit’). group.

This amount must not exceed £250,000.€300,000 (for most businesses).

TheThere netare benefitlower amountlimits for certain businesses, for example those whose main activity is in the agriculture or fisheries sectors. You can contact HMRC for advice, email randd.policy@hmrc.gov.uk for more information.

De minimis aid means support provided under any of a givennumber 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:

• Commission Regulation (EU) No 2023/2831 (de minimis aid) — on the European Union website
• Commission Regulation (EU) No 1408/2013 (de minimis aid in the agriculture sector)
• Commission Regulation (EU) No 717/2014 (de minimis aid in the fishery and aquaculture sector) — on the European Union website
• Commission Regulation (EU) No 2832/2023 (de minimis aid granted to undertakings providing services of general economic interest) — on the European Union website

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

TheTo network benefitout forthe aadditional givenrelief claimyou’ll underneed ERISto:

1. Add forup anall accountingthe periodbenefit isamounts calculatedfrom usingthe claim.
2. Then subtract the followingnet formula:

   Nvalue =of (Athe RDEC — +that Bthe +company C)would –have D

   Where:

   • Nqualified isfor if the netexpenses benefithad amount
   • Ainstead isbeen theclaimed amountunder Chapter by1A whichof thePart liability13 of the companyCorporation toTax payAct corporation(2009). taxThis (inis anythe accountingthird period)amount iscovered reducedin section as1042K a result of the ChapterCorporation 2Tax reliefAct obtained(2009), by the companyinitial foramount of expenditure credit, minus the period,notional fortax examplededuction.

You byshould include the usefollowing ofbenefit lossesamounts arisingin asthe acalculation:

• the resultamount ofof R&D tax credit to which the claimcompany foris aentitled, periodand againstwhich profitsit ofclaims, anotherfor the period
• B is the sum of any amounts by which the liability of any other company to pay corporation tax (inin anythe accountingperiod period) is reduced by virtue of a loss that both:
  • (a) arises as a result of the Chapter 2 relief obtained by the company for the period
  • (b) is surrendered by the company to the other company under under Part 5 or 5A of the Corporation Tax Act 2010 (surrender (surrender of relief between members of groups and consortia)
• Cthe isamount by which the amountliability of R&Dthe company to pay corporation tax creditin toany whichfuture theaccounting companyperiod is entitled,reduced andby whichany itlosses claims,carried forforward from the current period
• D iswhich arose from the netERIS claim

You valueshould ofdo thethis RDECfor ERIS claims thatmade in any previous accounting period of the company wouldthat havebegan beenon entitledor toafter had1 theApril expenditure2024, inand respectended ofwithin which the companyperiod claimsof Chapter3 2years reliefending insteadwith been the subjectfinal day of athe claimaccounting forperiod reliefin underquestion.

To Chapterthis  1Aamount, ofyou Partshould 13then add the value of CTAall 2009other —de thisminimis isaid definedreceived asin the thirdsame amountaccounting referredperiods toby inany sectioncompany 1042Kin ofthe CTAgroup, 2009for (theexample initialthe amount of expenditureany credit,grant minuswhich thecounts notionalas taxde deduction) minimis aid.

ToIf workyou outare theunsure relevantwhether netor benefit,not addan together:

• theamount netreceived benefitis forde theminimis claimaid, inyou should ask the currentperson accountingor period
• authority which provided the netamount.

  This benefitshould amountsinclude forany ERIS claims,benefits madereceived inby any previousother accountinggroup periodcompany, offor theexample companyif thatanother begancompany onalso orclaims afterERIS 1itself.

  The Aprilresulting 2024,figure and(all endedbenefits, withinless theRDEC) periodshould ofnot 3exceed yearsthe endinglimit withfor the finalcompany day(read of the accountingsection period“How inmuch question

Theyou relevantcan netclaim benefitunder must not exceed £250,000. ERIS”).

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

YouIf canthere is any expenditure you cannot claim RDECERIS forfor, anybecause additionalit qualifyingwould R&Dtake you over the limit, you may be able to claim RDEC expenditurefor that under the new merged scheme.scheme, provided you satisfy its rules.

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