CIRD90500 – A guide to the SME R&D payable tax credit rules

Recent updates to CIRD90500, the HMRC guidance governing SME R&D tax relief and payable tax credits for surrenderable losses, are important for any business claiming R&D incentives. While the fundamental rules remain, key changes affect how surrenderable losses and payable credits are calculated.

This article concerns claims starting before 01/04/2024, i.e. those that are not utilising the new RDEC or ERIS schemes. Rather, this concerns claims with a start date before this date, where the SME and RDEC schemes were accessible.

What CIRD90500 covers

CIRD90500 explains the mechanism that allows an SME to “surrender” part of its trading loss in return for a cash credit. This has long been an important source of support for early-stage and scaling companies investing heavily in innovation.

What remains unchanged:

• Claims are submitted through the CT600 within normal filing deadlines
• Payable credits are not treated as taxable income
• The company must be a going concern at the time of the claim. See CIRD81130.

The core framework is still familiar. Where things differ is in how the surrenderable loss is calculated and the size of the credit available.

The old system: Higher enhancement rates and higher cash credits

Under the pre-2023 SME R&D scheme, the amount a business could surrender as a loss was based on the lower of:

The unrelieved trading loss, and a percentage of qualifying R&D expenditure – These percentages shifted over the years:

• 150% (pre-July 2008)
• 175% (from Aug 2008)
• 200% (from Apr 2011)
• 225% (from Apr 2012)
• 230% (from Apr 2015)

The payable credit itself was also generous over this period, varying and peaking at 14.5% of the surrenderable loss.

For accounting periods crossing rate-change boundaries, the old rules required splitting expenditure across time bands and applying different enhancement and surrender rates.

What’s changed since 1st April 2023

The updated CIRD90500 reflects a very different landscape. HMRC has trimmed the SME scheme to encourage more UK-focused innovation and reduce the size of large, cash-heavy claims.

Here are the big changes:

A lower enhancement rate

The uplift on qualifying R&D expenditure is now much smaller. Surrenderable loss is based on:

• The unrelieved trading loss
• 186% of R&D spend

That’s a big drop from the historic 230%.

A lower payable credit rate

The cash credit you receive is now 10%, not 14.5%.

A new PAYE/NIC-based cap

This cap limits the cash credit to the lower of:

• 10% of your surrenderable loss, or
• £20,000 + 300% of relevant worker costs

This ties the benefit more closely to UK payroll, reinforcing HMRC’s push for domestic R&D employment.

Handling periods that straddle April 2023

This is where both versions of CIRD90500 put in the heavy lifting.

If your accounting period crosses 1 April 2023, you can’t simply apply one rate. You must:

• Split qualifying R&D spend by financial year,
• Apply the appropriate enhancement rate to each part,
• Recalculate your trading loss after each uplift,
• Apportion the resulting loss by days across the two financial years, and
• Apply the correct payable credit rate to each slice.

It’s fiddly, but necessary. The updated guidance includes a full example that walks through the mechanics of turning a taxable profit into a loss, then dividing and calculating the payable credits separately. It’s worth reading if your business (or your clients) cross that April boundary.

What hasn’t changed?

Despite the revised rates, several core principles remain consistent:

• You still need a surrenderable loss linked to enhanced R&D expenditure.
• The company must still be a going concern at the point of claiming.
• PAYE/NIC caps still consider only the company’s own employees.
• Timing matters: R&D relief is always applied based on the year the expenditure was incurred, not when it hits the P&L.

So, although the calculations look different, the logic behind them hasn’t shifted dramatically.

Why these changes matter for SMEs

For loss-making companies, the updated CIRD90500 means:

• Cash credits will be smaller for most claimants.
• Businesses using contractors or overseas workers may hit the PAYE cap sooner.
• Start-ups that relied on R&D cash injections will need to revisit their cash flow assumptions.
• More effort will be required to prepare claims that span the transition period.

On the upside, businesses with strong UK-based teams may still access meaningful credits, though not at the historic levels.

Final thoughts

The updated CIRD90500 reflects a major pivot in UK R&D tax policy. The government has clearly shifted the SME scheme away from high cash subsidies and toward a model that rewards UK-based technical employment.

If you’re claiming R&D tax credits, especially payable credits as a loss-making SME, you now need to:

• Understand which rates apply to your expenditure
• Split claims correctly for straddling periods
• Review the impact of the new worker-related cap
• Forecast cash flow with the reduced 10% rate in mind

These changes don’t eliminate R&D support for SMEs, but they do make the landscape more complex and less generous than before.

For full details of the CIRD90500 guidance, visit: CIRD90500 – R&D tax relief: SME scheme: payable tax credit – for surrenderable loss – HMRC internal manual – GOV.UK

If you would like any support with understanding any of the information provided within the CIRD manuals, please get in touch with our expert R&D tax team.