From 1 April 2022 – 31 March 2023
SME Scheme
• Additional deduction: 130%
• Payable tax credit (for loss-making companies): 14.5%
• Effective benefit:
o Up to 33.35% for loss-making SMEs
o Approx. 24.7% for profitable SMEs
RDEC Scheme (Large companies / some SMEs)
• Credit rate: 13%
• Taxable benefit: Approx. 10.5% after Corporation Tax
From 1 April 2023 – 31 March 2024
SME Scheme (Standard)
• Additional deduction: Reduced to 86%
• Payable tax credit (loss-making): Reduced to 10%
• Effective benefit:
o Up to 18.6% for loss-making SMEs
o Approx. 21.5% for profitable SMEs
R&D-Intensive SME Scheme (ERIS) Loss making
• Additional deduction: 86% (same as standard SMEs)
• Credit rate: 14.5% (higher than standard 10%)
• Eligibility: For loss-making SMEs spending ≥40% of total expenditure on R&D
• Effective benefit: Up to 27%
RDEC Scheme
• Credit rate: Increased to 20%
• Net benefit:. 15%
Accounting periods starting from from 1 April 2024
Merged R&D Scheme
• Applies to: Most SMEs and large companies
• Unified credit rate: 20%
• Effective benefit:
o 15% for companies with profits above £50k
o 16.2% for loss-making companies (after notional 19% CT offset), and profitable companies paying 19% CT.
R&D-Intensive SMEs (ERIS)
• Continue under SME rules
• Additional deduction: 86%
• Payable credit rate: 14.5%
• ERIS threshold lowered: Now 30% of total expenditure
• Effective benefit: Up to 27%
Key Takeaways
• SME relief was significantly reduced from April 2023, with the additional deduction falling from 130% to 86%, and the credit rate dropping from 14.5% to 10%.
• The ERIS scheme preserves enhanced support, with a 14.5% credit rate and up to 27% benefit for eligible loss-making SMEs.
• RDEC increased from 13% to 20% in April 2023, improving relief for large companies and ineligible SMEs.
• From April 2024, a single merged scheme simplifies R&D tax credits for most businesses. Only R&D-intensive SMEs retain access to the SME-style relief structure.