R&D tax frequently asked questions
A list of your most frequently asked questions about R&D.
How does the R&D credit work?
The R&D tax credit system in Ireland is an “incremental” scheme. A company can claim the qualifying R&D expenditure in an accounting period, over and above the R&D expenditure which it incurred in the base year of 2003.
The tax credit is 25% of the incremental expenditure spent i.e. €2,500 of every €10,000
Over recent years the Department of Finance has included a volume based element to the scheme, where initial qualifying expenditure is not linked to the base period. This has been increased by successive finance acts as shown in the table below.
|Periods starting on or after||Expenditure excluded from incremental base||Associated Credit|
|1 January 2012||€100,000||€25,000|
|1 January 2013||€200,000||€50,000|
|1 January 2014||€300,000||€75,000|
For R&D expenditure over and above the excluded amount, only the amounts incremental to the base year spend can be claimed.
How is the tax credit used by my company?
R&D credits can be used in a number of ways, although this does have to be in a certain order.
1a. tax credits are first used to offset any corporation tax due for the accounting period being claimed or
1b the 2012 Finance Act enabled credits received for accounting periods starting after 1 January 2012 to be surrendered to certain key employees
2. excess credits can be used to reclaim prior year tax paid
3. excess credits received for accounting periods starting after 1 January 2009, can be claimed as cash repayments over three years
4. Credits can be carried forward indefinitely
How long does a company have to make a claim?
A company must claim the credits within one year of the end of the accounting period in which the expenditure was incurred.
What type of expenditure qualifies for R&D tax credits?
A company can claim the R&D costs incurred in the Irish company carrying out the R&D. This typically includes:
- the salaries of the project team
- materials and consumables used in the project
- equipment (if this qualifies for plant and machinery capital allowances)
- sub contracted R&D costs incurred by third parties or universities (subject to certain restrictions)
- an apportionment of overheads such as rent, rates and utility bills incurred in performing the R&D
What do I need to do to claim R&D tax credits?
The R&D expenditure incurred in 2003 must be evaluated and projects for the year being claimed must be assessed against Revenue’s criteria for technical qualification and the accounting requirements. The R&D tax figure must be submitted as part of the corporation tax return or an amendment to the return. Revenue requires that a company must maintain documentation which supports the R&D claim. Deloitte recommend that this is a combination of contemporaneous project documentation and documents summarising the projects claimed.