R&D is a key driver of sustainable productivity and growth and the government is committed to supporting and raising R&D levels via its strategy of building a “smart economy”. Companies engaged in qualifying expenditure can avail of an effective tax deduction of 37.5% under the Irish Research and Development Tax Credit Regime. This is a very valuable relief to companies undertaking qualifying research and development activities.
A credit of 25% of incremental expenditure on revenue items, royalties and plant and machinery related to R&D may be offset against a company’s corporation tax liability in the year in which the expenditure is incurred. It can amount to 25% of the total amount spent on R&D which, combined with the standard corporate tax deduction of 12.5%, meaning that qualifying businesses can claim a tax refund of up to €37.50 for every €100 of expenditure.
There is also the facility for companies to receive a cash refund from Revenue in relation to qualifying expenditure where the company does not have sufficient corporate tax profits against which the credit can be used.
And it is not just the preserve of large high tech corporates – R&D occurs in a range sectors, including farming, once the business is carried on through a company.
The government have committed to review the R&D Tax Credit regime in 2013, the first such review since the scheme was introduced in 2004. The stated objective of this review is to ensure that the Irish R&D Tax Credit regime remains ‘best in class’ internationally.
We find the largest impediment to claiming this relief is lack of knowledge – most businesses simply don’t realise they qualify. Any company involved in some form of innovation or process improvement could find the related costs qualify for the R&D tax credit. The R&D must be seeking to achieve a specific advancement in, or a resolution of a specific uncertainty in, the field of science or technology concerned and the range of activities to which the R&D credit can apply is extremely wide.
We assist our clients:
- Identifying any qualifying activities they are engaged in
- Identifying the related expenditure these activities generate
- Liaising with the Revenue Commissioners with any queries and approvals
- Preparing the R&D claim in a format that is acceptable to Revenue