Quick answer: A loss-making R&D claim is one from a company without enough taxable profit to absorb the relief. Under the merged scheme it can surrender the credit for a payable cash amount of approximately 16.2p per £1 of qualifying spend, or 27p per £1 under ERIS for qualifying R&D-intensive SMEs, both subject to the PAYE and NIC cap.
What is a loss-making R&D claim?
A loss-making R&D claim is an R&D tax relief claim from a company that has insufficient taxable profit to absorb the relief. Under the merged scheme from 1 April 2024, a loss-making company surrenders the above-the-line credit for a payable tax credit at a net rate of approximately 16.2p per £1 of qualifying expenditure. A qualifying loss-making R&D-intensive SME instead claims under ERIS at 27p per £1. Both routes are subject to the PAYE and NIC cap introduced in 2021.
How does HMRC define the payable credit for loss-making companies?
HMRC guidance on payable credits is at CIRD90400 for the merged scheme and CIRD90700 for ERIS. The PAYE and NIC cap rules are at CIRD90500 and CIRD90710. The legislation is in Chapters 1A and 2 of Part 13 of the Corporation Tax Act 2009.
What does a loss-making R&D claim look like in practice?
A loss-making software start-up has £250,000 of qualifying R&D expenditure in the year ended 31 March 2025. It does not meet the 30% intensity threshold. Under the merged scheme, the company surrenders the credit for a payable amount of approximately £40,500, subject to the PAYE and NIC cap applied to its workforce costs. The free eligibility calculator can estimate the payable credit for a loss-making company’s own qualifying spend.
Related terms
Frequently asked questions
A loss-making company can surrender the above-the-line credit under the merged scheme for a payable tax credit at a net rate of approximately 16.2p per £1 of qualifying expenditure, rather than only carrying the benefit forward against future profits.
Enhanced R&D Intensive Support (ERIS) is a higher-rate route for qualifying loss-making R&D-intensive SMEs, paying approximately 27p per £1 of qualifying expenditure instead of the standard loss-making rate.
No. Both the standard loss-making route and ERIS are subject to the PAYE and NIC cap introduced in 2021, which limits the cash amount a company can receive based on its payroll costs for the period.