The Research and Development tax credit scheme is critical for businesses looking to innovate, improve their products, or explore new systems/ technologies. To encourage these efforts, The Republic of Ireland offers the R&D Corporation Tax Credit. this credit allows companies to claim back a portion of their R&D expenditure, providing valuable financial support for their innovative projects.
For accounting periods beginning on or after 1 January 2024, the rate for these credits has increased from 25% to 30%, enabling businesses to claim back up to 30% of eligible R&D costs, making this a key consideration for any company involved in scientific or technological advancement.
What Qualifies as R&D in the Republic of Ireland?
To be eligible for the R&D Tax Credit, a company’s activities must meet certain criteria. These activities should:
Be Systematic and Experimental: They must involve a methodical approach, such as structured investigation or experimental development.
Belong to Science or Technology Fields: Only R&D activities within these fields qualify.
Fall Within Specific Categories:
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- Basic Research: Pure scientific exploration with no direct commercial aim
- Applied Research: Practical applications intended to solve specific problems
- Experimental Development: Creating or improving products, processes, or services
- Capital Expenditure: Such as investment into plant and machinery
Advance Scientific or Technological Knowledge: The R&D efforts should strive to break new ground or push existing boundaries.
Address Scientific or Technological Uncertainty: The R&D should involve challenges that require novel solutions or approaches.
Pre Filing Notification Requirement
With new regulations introduced for accounting periods starting on or after 1 January 2024, certain companies must now file a pre-filing notification before claiming the R&D Tax Credit. This requirement applies to companies submitting a claim for the first time, or for those that haven’t claimed within the previous three years. The pre-filing notification must be submitted to Ireland’s Revenue Commissioners at least 90 days prior to making the claim.
For companies that have submitted a successful R&D credit claim in any of the previous three years, this pre-filing requirement is waived, simplifying the process for frequent claimants. This recent measure aims to increase transparency and ensure the robustness of R&D claims.
Other Key Points to Consider
- Tax Credit vs. Overpayment: Companies can opt to offset the R&D Tax Credit against their corporation tax liabilities, and in some cases, they may be eligible to receive a cash refund if the credit exceeds their tax payable.
- Qualifying Expenditure: Eligible costs include wages and salaries for staff engaged in R&D, costs for materials and utilities, and even certain outsourced R&D expenses, provided they meet Revenue’s specific guidelines.
Ireland’s R&D Tax Credit Scheme is a valuable incentive for companies pushing the boundaries of science and technology. With the recent rate increase to 30% and the introduction of the pre-filing notification, it’s essential for businesses to stay updated on these requirements to fully benefit from the scheme. This highlights the importance of working with a chartered and legislated firm that stays on top of all key updates and can consult you on best practise when compiling and submitting the claim.
Our team of R&D experts are on hand to support you with the complexities of R&D tax claims, you can contact them via our Contact Us page
