What are the main differences between NI ERIS, RDEC and ERIS?
For all three schemes, the rules around what qualifies as eligible R&D and what costs can be claimed are essentially the same. However, the qualifying criteria, amount that can be claimed and how the tax benefit is calculated are slightly different for each. Here’s a quick summary of the main points:
| RDEC | ERIS | NI ERIS |
Company must be loss-making | No | Yes | Yes |
Company must be an SME | No | Yes | Yes |
Company must have a registered address in NI | No | No | Yes |
Eligible R&D spend must be >30% of trading and operating expenses | No | Yes |
|
Overseas expenditure restricted | Yes | Yes | No |
Subject to €300,000 de minimis limit | No | No | Yes |
Benefit calculation | 20% of eligible expenditure, subject to corporation tax | 86% enhancement, losses surrendered for 14.5% tax credit | 86% enhancement, losses surrendered for 14.5% tax credit |
How does this affect the claim preparation process?
In terms of gathering the data about the claim and calculating the eligible expenditure, the process is the same for both ERIS and NI ERIS. For subcontractor and EPW costs it’s still vital to gather data on whether they might be subject to the overseas restrictions and any exemptions as you need to be able to calculate the difference in benefit between NI ERIS, which would include overseas costs, and RDEC, which would exclude the overseas costs.
It's also important to look at whether the company is obliged to claim under NI ERIS and whether it could, or has, opt out of the restrictions. The things to considered here are:
- All NI companies can chose to claim through RDEC rather than NI ERIS
- Companies that do not carry out a trade in goods or activities related to electricty can choose to opt out of the NI provisions and claim through ERIS.
- Companies that do carry out a trade in goods or activities related to electricity cannot opt out and thus can only claim either NI ERIS or RDEC.
Finally, when gathering data about the claim, you’ll need to make sure to gather information about any De Minimis Aid received by the company, and any connected companies in the three-year period leading up to submitting the claim. You’ll also need to know about any previous NI ERIS claims, specifically the benefit received, and the amount of qualifying expenditure claimed.
The choice to claim through RDEC, ERIS or NI ERIS must be made on a case-by-case basis, considering the make-up of the qualifying expenditure, the company’s ability to opt out of the NI Provisions and the tax benefit available to the company through each scheme.
How do I calculate whether the company has reached the De Minimis Aid limit?
This is where NI ERIS claims can get tricky! To calculate whether a NI ERIS claim will breach the cap, claimants must add together the following:
- Any de minimis aid received by the company in the three years up to the date of submission of the R&D claim;
- If the claimant company is a member of a group, any de minimis aid received by any group company in the three years up to the date of submission of the R&D claim;
- The difference between any tax benefit received by the company or any group companies from previous NI ERIS claims in the three-year period and the amount of RDEC that would have been received
Once this figure has been calculated the company can work the maximum net benefit that can be claimed in the current claim period. For example, if the total De Minimis Aid received equals €290,000, then the difference between the amount claimed through NI ERIS and the benefit that would have been received if the same expenditure was claimed through RDEC cannot be more than €10,000.
If claiming the full qualifying expenditure through NI ERIS would breach the cap, then the amount that can be claimed through NI ERIS whilst allowing the claim to remain within the limits must be calculated and any remaining qualifying expenditure must be claimed through RDEC.