For a pre-revenue biotech or medtech company, Enhanced R&D Intensive Support (ERIS) is usually the most valuable R&D relief available: up to 26.97p per £1 of qualifying spend, paid in cash. A typical pre-revenue burn profile passes the 30% intensity test with a wide margin. The planning work sits elsewhere: in how the ratio moves as the company approaches launch, in connected company aggregation, and in when the cash actually lands in the bank.
This article works through each of those, with the arithmetic on the page. The scheme’s full conditions are set out in our guide to Enhanced R&D Intensive Support.
What is ERIS worth to a pre-revenue company?
Up to £26,970 in cash for every £100,000 of qualifying R&D expenditure. The mechanics are an additional 86% deduction (186% in total) followed by a payable credit of 14.5% of the surrenderable loss:
£100,000 x 186% x 14.5% = £26,970.
The credit is not taxable, so the headline figure is the net figure, and the “up to” assumes losses of at least 186% of the qualifying spend. A deeply loss-making preclinical biotech, or a medtech still building its regulatory evidence, usually has losses to spare, so the full rate is realistic. The same company under the merged scheme would receive £16,200 per £100,000 as a loss-maker. On a £1m annual R&D budget, the difference between the two schemes is over £100,000 a year of non-dilutive cash.
Does a typical pre-revenue burn profile pass the 30% test?
Almost always, and usually comfortably. The test asks whether relevant R&D expenditure is at least 30% of total relevant expenditure, with connected companies counted on both sides. It is an expenditure ratio: revenue does not appear in it at all, so having no sales is no obstacle.
Take an illustrative preclinical biotech spending £1,500,000 in the year. Of that, £1,050,000 goes on scientists’ salaries, CRO studies, lab consumables and other relevant R&D expenditure. The remaining £450,000 covers management, finance, premises, patent and legal costs. Intensity is £1,050,000 divided by £1,500,000, which is 70%. The threshold is not a close call for a company shaped like this.
The ERIS intensity calculator runs this ratio on your own numbers, including the connected company adjustments.
When does a biotech or medtech start to fail the test?
On the approach to launch, when the denominator grows faster than the R&D. Extend the same illustration forward. R&D spend holds at £1,050,000, but the company is now building regulatory, quality and commercial functions ahead of first revenue, and total expenditure reaches £3,000,000. Intensity is 35%: still a pass, but the margin has gone. A year later, with manufacturing scale-up and a sales team taking total spend to £4,000,000 against unchanged R&D, intensity is 26.25% and the test fails.
Notice what happened: the R&D did not change at all. Medtech companies are especially exposed, because the path from working device to revenue runs through exactly this kind of spend. The time to see the problem is at budget setting, not after year end when the ratio is already fixed.
How should the grace period be used?
As a buffer for one lumpy year, not as a plan. A company that qualified for ERIS in one period keeps access for the following period even if its intensity dips below 30%, provided the other conditions are still met. In the illustration above, the 26.25% year could still be claimed under ERIS because the 35% year before it qualified.
Two practical consequences follow. First, the sequence matters: a dip year is only protected if the year before it actually qualified, so a company hovering near the line should know its position each year, not just in the years it claims. Second, once the grace year is spent, a second consecutive sub-30% year falls to the merged scheme, and the cash forecast should say so in advance. For a company whose intensity is trending down as it commercialises, the honest model is a planned transition from 26.97p to 16.2p per £1, with the grace period deciding the timing.
A company that reaches profitability leaves ERIS regardless of intensity, and claims the merged scheme’s 20% credit for that period.
How do connected companies change the answer?
They can change it twice over. The intensity ratio includes connected companies on both sides, so a hugely R&D-intensive spinout connected to a trading business can fail on the combined numbers despite passing easily alone. And the SME definition (fewer than 500 staff, and either turnover under €100m or a balance sheet under €86m) aggregates connected and partner enterprises, which is where venture-backed structures need care: a company that looks small on its own can lose SME status through its investors or group.
Both tests should be worked at the structure level before a claim is assumed in any forecast. For biotech and medtech groups with a topco, an IP company and an operating company, where the R&D spend sits within the structure is itself a planning question.
When does the cash actually arrive?
After the claim is filed, so the company controls more of the timing than founders often assume. The ERIS credit is claimed through the corporation tax return, with the Additional Information Form submitted before or with the CT600. A company that closes its year end promptly and files early brings the credit forward; one that files near the statutory deadline pushes it back by the same margin. For a business on a measured runway, that difference is worth building into the cash forecast.
Three things can delay or reduce the payment:
- The claim notification deadline. A first-time claimant, or one that has not claimed in the previous three years, must notify HMRC within six months of the end of the period of account. Missing it invalidates the claim entirely. Pre-revenue companies are disproportionately first-time claimants, so the claim notification requirement belongs in the calendar from day one.
- The PAYE cap. Payable credits are capped at £20,000 plus 300% of relevant PAYE and NIC. A company running its science through CROs with a small internal team has a small payroll, and the cap bites there first. An exemption exists for companies creating or managing intellectual property with low connected-party subcontracting; establish it before the claim, not after the credit is restricted.
- An HMRC check. HMRC checks roughly one in six R&D claims, and an enquiry suspends the cash until it resolves. A claim with the intensity ratio, SME test and loss position evidenced at the time of filing resolves faster than one rebuilt under pressure. Our page on HMRC R&D enquiries covers the process.
One point that no longer affects timing or value: grant funding. Since April 2024, an Innovate UK or other grant neither blocks nor reduces ERIS.
Getting the forecast right
ERIS rewards exactly the profile of company we work with most: loss-making, R&D-intensive, and dependent on the credit as a real line in the runway model. The sector context sits on our biotech and medtech pages. If you want a considered view on your intensity trajectory, your group structure or a first claim, talk it through with a chartered adviser: we will show you the arithmetic before any work starts.
Written by Matthew Jones ACA CTA. Last reviewed July 2026.
Sources
- Merged scheme & ERIS guidance — the ERIS 186% enhancement, 14.5% payable credit and the loss-making, R&D-intensive conditions.
- CIRD123000: ERIS intensity condition — the 30% R&D-intensity test and the one-year grace period.
- R&D relief for SMEs (definition & old rates) — the SME definition a company must meet to use ERIS.
- Tell HMRC you plan to claim (claim notification) — the six-month claim-notification window and the three-year test.
This article describes the rules as they stood at the review date above. The rules change: for the current position, start with our guides or talk to us.
