No. Neither the merged scheme nor ERIS puts a ceiling on qualifying R&D expenditure, and neither caps the credit that expenditure produces. What exists instead is a set of mechanisms limiting how much of the credit reaches the bank — and one genuine cap under the old SME scheme, still relevant to periods you can amend.
The current schemes are built from percentages, not amounts
CTA 2009 s1042G turns qualifying expenditure into merged scheme credit at 20%. No monetary figure appears anywhere in that calculation. ERIS is constructed the same way: an additional deduction of 86% under s1044(8), then a payable credit set at 14.5% of the surrenderable loss. £40,000 of qualifying spend and £40m run through identical arithmetic.
HMRC’s guidance on the two schemes sets out the restrictions that do apply: the PAYE cap, and the 30% intensity condition for ERIS. A limit on qualifying expenditure is not among them, because there is none.
Three things limit the cash
The PAYE cap is the one that bites in practice. Section 1112B restricts a payable credit to £20,000 plus 300% of the company’s relevant PAYE and NIC, and a company meeting both statutory conditions is exempt altogether.
Which scheme you are in decides what happens to the excess. Under the merged scheme it carries forward into the following accounting period without a fresh claim, so the value is deferred rather than lost. Under ERIS there is no equivalent route for the credit: s1058(1) fixes it at the lesser of 14.5% of the surrenderable loss and the cap itself. The loss behind it can be kept, but only by surrendering less: a claim sized to the cap leaves the balance to carry forward for relief against future profits, while a full surrender against a capped credit gives that balance away for nothing.
The third mechanism is not a cap, though it is often described as one. The merged scheme credit is taxable, and step 2 of the payment sequence withholds a notional tax deduction. That amount is not forfeited: it carries forward against future corporation tax or can be surrendered to a group company. It reduces what arrives without reducing the claim, and the arithmetic is set out here.
The old SME scheme did have a ceiling
For accounting periods beginning before 1 April 2024, still amendable into 2027, SME relief was capped by reference to total aid going to a single project. Section 1113 as it then stood gave relief only so far as total aid for expenditure attributable to one project stayed below 7.5 million euros. Aid was measured more widely than the relief claimed: s1114 set the formula, and HMRC’s manual describes the figure as the benefit of the SME scheme less the relief the company would have had as a large company.
Two features are easy to miss. The cap ran per project rather than per company or per period, so aid well beyond €7.5m across a programme of separate projects fell outside it — and it belonged to the SME scheme alone. Finance Act 2024 replaced the entire chapter containing it for periods beginning on or after 1 April 2024, and nothing equivalent carried into the merged scheme. A backdated claim has to be tested against the rules of its own period.
Large claims are not capped, but they are read closely
HMRC checked around one in six claims in 2023-24, its latest published figure. Its published approach also confirms that every claim from a Large Business customer is reviewed, with checks opened where risk assessment points to one. Size does not restrict what you can claim. It changes how much you should expect to stand behind.
Where to go next
The only real ceiling is the qualifying expenditure you can properly identify — neither understated through caution nor inflated through optimism. That figure starts with the qualifying cost categories. If your claim is large enough that the cap or the intensity condition might be in play, talk to us before the return goes in rather than after.
Sources
- Section 1042G, Corporation Tax Act 2009 — the merged scheme credit as a percentage of qualifying expenditure, with no monetary limit.
- Section 1044, Corporation Tax Act 2009 — subsection (8), the additional deduction of 86% of qualifying Chapter 2 expenditure.
- R&D tax relief: the merged scheme and ERIS — the restrictions HMRC states for the current schemes: the PAYE cap, the 30% intensity condition, and the credit’s taxable status. No limit on qualifying expenditure appears.
- Section 1112B, Corporation Tax Act 2009 — £20,000 plus three times relevant PAYE and NIC, proportionately reduced at subsection (3) for periods shorter than twelve months.
- Section 1058, Corporation Tax Act 2009 — subsection (1), setting the Chapter 2 credit at the lesser of 14.5% of the surrenderable loss and the cap.
- CIRD112100: merged scheme payment steps — the payment sequence, including the step 2 notional tax deduction and its carry-forward or surrender to a group company, and the step 3 amount restricted by the PAYE cap, which carries into the next accounting period without a further claim.
- Section 1113, Corporation Tax Act 2009, as it stood before 1 April 2024 — relief given only so far as total aid for expenditure attributable to a project would not exceed 7.5 million euros, applying to Chapter 2 SME relief.
- CIRD81160: total aid to project €7.5m or less — the cap from 1 August 2008, the SME and vaccines schemes only, and aid measured net of large company relief.
- Finance Act 2024, Schedule 1, Part 1 — paragraph 8, substituting the whole of Chapter 8 of Part 13 (previously headed “cap on aid for R&D”), with effect for accounting periods beginning on or after 1 April 2024.
- HMRC’s approach to R&D tax reliefs 2023 to 2024 — 9,700 compliance checks on around 61,000 claims, the source of the one-in-six check rate, and the review of all Large Business claims.
This page describes the rules as they stood at the review date above, as general information rather than advice on your circumstances. For how that distinction works, see our terms; for an answer on your own facts, talk to us.