Company Making A Loss? Don't Forget R&D Tax Credits
R&D Tax Credits: An essential source of innovation funding
The Irish government has long recognised company innovation as being the key to economic success. This is why it has chosen to reward innovative projects for many years, bringing about the continued development of ground-breaking technologies and pioneering solutions.
However, the very nature of such experimental work means that many Small and Medium Enterprises (SMEs) end up being unprofitable particularly during their early years. But this isn’t a problem with R&D Tax Credits.
The Revenue’s R&D Tax Credits scheme was launched back in 2004, enabling many Irish businesses to benefit from government support for their science and technology-advancing projects. Thousands of companies all over Ireland have since taken advantage of the scheme, across a broad range of industries. Indeed, for companies running at a loss, such an injection is proving to be a valuable source of funding for further R&D work.
The myth: Only profitable companies can claim R&D Tax Credits
We hear this one a lot and it’s simply not true. Whilst many claimants of R&D Tax Credits are indeed turning a profit, the scheme is also open to those who are loss-making. As long as the project has demonstrably sought to make an advancement in science or technology then you may be able to offset losses made against R&D expenditure. The amount raised can also be significant.
How do R&D Tax Credits work?
Administered by the Irish Revenue, R&D Tax Credits are open to any company based in Ireland or inside the European Economic Area. R&D expenditure that qualifies for the programme will generate a 25% Tax Credit for offsetting against Corporation Tax. This is extra to the standard rate which is currently 12.5%. When you add these together you then realise how lucrative the scheme is, as up to €37.50 in every €100 of R&D expenditure can be claimed back.
How is the credit provided?
As mentioned, for companies that have turned a profit either in the current tax year or the one immediately prior, the credit can be used against their Corporation Tax liability. However, loss-making companies can receive the benefit as a cash lump sum instead. This is administered in three equal instalments over a three year cycle (one payment per year).
The refund is limited to either the Corporation Tax that the company has paid over the last ten years, or the payroll liabilities for the period during which the R&D project took place (whichever is greater). Alternatively, companies can choose to simply carry the credit forward until they do start to make a profit and therefore have a Corporation Tax liability.
For loss-making companies it’s certainly worth claiming, as the cash could mean the difference between another year of work or the company being liquidated. Note that R&D Tax Credit claims need to be made within twelve months from the end of the accounting period during which the R&D expenditure was incurred.
More in-depth information can be found on our R&D Tax Credits page.
Is your business eligible to make an R&D Tax Credits claim?
Any company of any size and in any industry can apply for R&D Tax Credits. Many companies apply having devised a brand new product, service or process, whilst others have appreciably upgraded an existing one. This could be because they’re a food or beverage company looking to try out a new range of flavours for example. The possibilities are pretty much endless.
Although the scope of eligible activities is massive, Revenue lays down some very strict criteria regarding the claims process. The most important thing here is that the R&D project didn’t just bring about commercial benefits for the company itself - it also needs to have benefitted the wider industry as a whole.
We can’t emphasis enough how tough Revenue’s criteria is and how getting your claim right first time is absolutely crucial. Before you even think about making a claim, it’s therefore strongly advised you speak to an R&D Tax Credits specialist like Myriad Associates (developers of the Tax Cloud portal). We will be able to determine your eligibility and your chances of success, before optimising your claim for maximum value.
Don’t miss out on this highly valuable cash injection just because you didn’t turn a profit
Regardless of your company’s financial position, if you can clearly demonstrate that you fulfil Revenue’s requirements, R&D Tax Credits could allow you to continue pursuing innovative research and development work going forward.
How the Tax Cloud portal works for you
The Tax Cloud portal is a great value, intuitive way of working out how much your company can claim. Once your calculations are complete, you will then have the opportunity to make a fully guided application that adheres to all the relevant criteria in a concise, effective way. It also helps you to see if any relevant expenditure has been missed off, so you know you’re receiving everything you’re entitled to. It’s cloud-based so you can access the Tax Cloud portal from any internet-connect device at a time that suits you. It integrates with Xero too, plus you can save your application at any point and come back to it later.
Tax Cloud was developed exactly for this purpose by the R&D funding experts at Myriad Associates. Our Dublin and UK-based teams are made up of R&D specialists and funding advisors who are on hand throughout if you have any questions. Plus, we will look through your claim in detail to check it before it’s sent off to Revenue - no worry and no hassle.
And the other good news is that the cash gained from R&D Tax Credits can be spent on anything. Some companies spend it on further stock, moving premises or paying off debts, while others plough it into further R&D. The choice is yours!
Try the Tax Cloud portal for businesses today to see what you could claim and start your fully supported application.
Need further advice?
If you would like to know more about claiming R&D Tax Credits for your SME business, speak to our friendly team today on +353 1 566 2001. Alternatively, you can submit an online enquiry form and we’ll call you back. We look forward to hearing from you.
- Submitting R&D tax claims since 2001
- 100% success rate
- Over €100m claimed and counting
- Industry leading specialists
- In-house technical, costing and tax experts
- Member of the Research and Development Consultative (RDCC) committee
Meet some of the team behind Tax Cloud