Business Planning: Taxation 2025 Syllabus Update: R&D
Following the first substantial change to the syllabus content on R&D for several years, students now need to be familiar with the ERIS and merged RDEC scheme refunds content. In this article, we summarise the rules.
Enhanced R&D Intensive Support (ERIS)
For accounting periods on or after 1 April 2024, R&D relief for most companies has been merged and broadly follows the RDEC system that applies to large companies.
R&D tax credits under ERIS can still be claimed by companies which are:
- Classified as an SME
- In a loss-making position
- R&D intensive
A company is considered loss-making if it has a tax-adjusted trading loss before deducting the additional 86% relief for qualifying R&D expenditure.
The R&D intensive criteria is met when qualifying R&D expenditure constitutes at least 30% of the company's total relevant expenditure, which broadly encompasses all trading expenses recognised under Generally Accepted Accounting Principles (GAAP).
For eligible companies, the ERIS scheme offers a tax credit of 14.5% on the surrenderable loss. The PAYE cap may still apply unless the company is exempt.
Merged RDEC Scheme
For companies not qualifying for ERIS, R&D relief will now broadly follow the RDEC system previously applicable to large companies. This merged scheme introduces some key changes, particularly in how refunds are calculated and processed.
Refund Calculation
Companies claiming under the merged RDEC scheme can potentially receive a repayment if their RDEC amount exceeds their current period corporation tax liability. The calculation process is similar to that used for large companies, with two notable differences:
- For loss-making companies or those with taxable trading profits up to £50,000, notional tax is deducted at 19% instead of 25% in Step 2 of the calculation.
- The PAYE cap in Step 3 is set at £20,000 plus 300% of the company's total PAYE and Class 1 NIC liabilities for the accounting period, mirroring the cap used in the ERIS tax credit calculation.
As with all the 2025 syllabus changes, we have updated the content in our Professional Level subscription package to keep you fully up-to-date (including through our online quick-fire question content).
Comments ()