R&D Tax Credits

Eligibility of Overheads

R&D Tax Credits – Eligibility of Overheads

The 2013 Department of Finance Review of Ireland’s R&D Tax Credit regime stated that Ireland performs well by international standards in allowing indirect costs so long as they are incurred “in the carrying on of R&D”. The review acknowledges a number of submissions expressing concern about uncertainty around additional indirect costs that may be allowable for the credit. Consequently, it was suggested that additional Revenue guidelines may be preferable to legislation, as they allow for more frequent updating.

The latest Revenue guidelines, issued January 2015, reiterate their position (first expressed in the December 2012 guidelines) that the phrase “in the carrying on” must be distinguished from “for the purposes of” or “in connection with” used elsewhere in the Taxes Consolidation Act 1997. 

However, the latest guidelines differ to previous versions in that examples are provided of indirect costs that do not qualify as relevant expenditure; these include: recruitment fees; insurance; travel; equipment repairs or maintenance; shipping; business entertainment; telephone charges; bank charges; interest; HR costs; payroll team costs; and canteen costs. 

Given that the legislative definition of “expenditure on research and development” has remained unchanged in this regard, it is our view that the varying guidance provided by Revenue has generated significant discrepancies in dealing with the treatment of indirect R&D expenditure.

The guidelines are silent on the following:

• Revenue’s position as to the eligibility of other indirect costs, given that previous guidelines regarded the cost of indirect supporting activities such as maintenance, security, administration,  clerical, finance, and personnel activities as eligible, along with ancillary activities essential to the undertaking of research and development activities 

• Is there scope to claim costs that Revenue have indicated as ineligible (for example, recruitment fees, insurance, travel) where such costs meet the legislative requirement (i.e. are incurred wholly and exclusively for qualifying R&D activities)?

• Revenue cite travel costs as non-qualifying and yet other State bodies (i.e. Enterprise Ireland and the IDA) specifically allow R&D-related travel costs in providing grant assistance for undertaking R&D. What is the position, if grant assistance includes travel costs? 

• The implied contradiction whereby it would appear from the guidelines that administration and general support services (such as transportation, storage, cleaning, repair, maintenance and security), which are wholly and exclusively undertaken in connection with a research and development activity, are qualifying albeit they are undertaken “ in connection with” a qualifying R&D activity. 


Although the new guidelines have clarified Revenue’s position with respect to a range of items, uncertainty remains with respect to indirect costs. Such costs should be assessed on a case-by-case basis and to the extent a company intends to claim future indirect costs then very careful consideration should be given to the new guidelines.

Deloitte Ireland is a leading adviser with respect to Ireland’s R&D Tax Credits and prepares a large number of R&D tax credit claims annually for clients across a wide range of industries. We have had discussions with Revenue in respect of the latest guidelines, and have a thorough understanding both of the guidelines and how they can apply across a range of scenarios. Please contact any member of our dedicated R&D Tax team to discuss any R&D-related queries you may have. 

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