The tax credit

Ireland is one of the world’s leading locations for research, development and innovation. There are a number of tax incentives to help support and encourage businesses that wish to carry out R&D activities and the cornerstone of those incentives is the R&D Tax Credit.

Companies of all sizes can claim the R&D tax credit once they are carrying out qualifying activities and meet the relevant criteria. The tax credit offers a refund of up to 25% of the R&D spend. This is in addition to the standard corporation tax deduction of 12.5%, meaning for every €1,000 spent on R&D, the actual cost to busines is €625.

Finance Act 2019 amended the R&D credit legislation in its application to micro and small sized companies (i.e. those with less than 50 employees and/or a balance sheet not exceeding €10m.) Now, the tax credit rate for such companies stands at 30%, higher than the 25% applicable for other companies.

Who can qualify?

To qualify for the credit, the following must apply:

  • the applicant must be a company;

  • the company must be within the charge to Irish tax;

  • the company must undertake qualifying R&D activities within the European Economic Area (EEA).

The R&D tax credits are generally associated with the technology, engineering and pharmaceutical industries, but it is often much broader than most businesses think. Examples of other industries that may qualify include:

  • Manufacturing

  • Architecture

  • Breweries & Wineries

  • Digital Media

If you’re developing a new product or process, applying for a patent or resolving problems of a technical nature then you might be due a tax refund.

The Two Tests

In order to claim the credit there are two tests to be satisfied. Firstly, the scientific test. This is to address the requirement that the activities carried out are of the sort to qualify for the relief. The second test is the accounting test. This involves quantifying the actual R&D spend for the period.

HLB Sheehan Quinn can help you ascertain if you might qualify for the relief. If there is an opportunity, our team of experts can prepare a formal review of the activities to confirm if they would meet the requirements of the legislation. We can then assist with quantifying the amount of the claim and advise on the books and records to be maintained.

If you would like to arrange a meeting to discuss your how we can help please contact us.