The merged UK R&D scheme simplifies much — but for Northern Ireland, ERIS introduces unique advantages and revived State aid complexities depending on your trade
The UK's R&D tax relief underwent a fundamental change in April 2024 with the introduction of the merged scheme. This reform replaced the old SME and RDEC schemes with two strands: a new version of RDEC (Chapter 1A) and Enhanced R&D Intensive Support (ERIS, Chapter 2).
At first glance, Northern Ireland companies appear to operate under the same merged scheme as the rest of the UK. However, due to the interaction with the Windsor Framework and the R&D Relief Regulations 2024, the reality is more nuanced — just for those accessing ERIS. These differences matter, especially if your trade involves goods or electricity, or if you benefit from State aid such as Innovate UK funding.
Overseas R&D: A Clear Advantage Under ERIS in Northern Ireland
But remember ERIS claims are less common, a company must be loss making before the R&D deduction (under ERIS) and 30% of its total expenditure must be on the R&D with the complication that connected through ownership parties must also be included. Sos ome not all claims qualify for different treatment under ERIS. RDEC treatment is the same as the rest of the UK with no overseas EPW or subcontractors costs claimable for accounting periods starting from 1st April 2024.
For Northern Ireland ERIS claims there is no need to demonstrate that the overseas R&D contributes to a UK activity or that ‘special circumstances’ applied. This relaxation applies regardless of the type of trade, including goods or electricity, provided the company qualifies under ERIS. So the EPW or subcontractor based overseas can be claimed with the normal reduction to 65% of the claimed expenditure.
In my view, reading the law, it has always been clear that RDEC claimants in Northern Ireland could not claim overseas expenditure. But due to some confusion in this area legislation has been recently proposed to make this absolutely clear.
State Aid Returns: A Revival for Certain Sectors
For companies trading in goods or electricity, however, ERIS reawakens the complexities of the old State aid rules.
Under the Windsor Framework, such trades are treated differently. Where ERIS is considered State aid, a €300,000 de minimis cap applies to the uplifted ERIS benefit — that is, the additional support ERIS provides compared to the RDEC strand. This cap applies over any rolling three-year period.
This means companies must perform a dual-calculation: work out their ERIS benefit, calculate what would have been received under RDEC, and determine the uplift. If this uplift — combined with any other State aid — exceeds the €300,000 ceiling, the excess must be claimed under RDEC instead. A failure to correctly self-assess could result in overclaims, clawbacks, or disqualification from ERIS.
In contrast, companies whose activities fall entirely outside goods or electricity (e.g. software, digital services, or scientific consulting) are unaffected by this restriction and may access full ERIS relief without the State aid cap.
Grants: A Split Path Between ERIS and RDEC
The interaction with grant funding also diverges based on which strand is being claimed.
Under ERIS, grants that are de minimis aid count towards the same €300,000 cap as the ERIS uplift. Where the grant is a notified State aid, such as certain Innovate UK Smart Grants or regionally selective assistance, ERIS cannot be used at all on the relevant R&D costs. Instead, RDEC must be used.
This echoes the pre-2024 position under the former SME scheme, where notified State aid displaced an SME claim into RDEC.
In contrast, RDEC is unaffected by these limitations:
- Grant-funded R&D is always eligible.
- There is no cap on the benefit.
- State aid rules do not apply — even in Northern Ireland.
Conclusion: Know Your Trade, Know Your Rules
While the UK now operates a single merged R&D scheme, the practical reality for Northern Ireland companies depends on what you do, where your R&D takes place, and how it is funded. For many service-based firms, ERIS provides generous and simplified access to relief. For companies dealing in goods or electricity, however, a cautious return to State aid compliance is essential — particularly when other aid is in play.
If you are based in Northern Ireland and planning to submit an R&D claim under ERIS, you must carefully assess how your trade type and funding sources influence eligibility and potential caps. The rules are more complex, and getting it wrong could prove costly.
For tailored advice on how to structure your R&D claim in Northern Ireland and to ensure full compliance with the Windsor Framework and the 2024 regulations contact us directly at:
https://randdtax.co.uk/contact
Christopher Toms MA MAAT
Compliance Director
RandDTax