R&D Tax Credits: Eligible Projects And Costs In Ireland
All companies completing R&D in Ireland can apply
Ireland’s Research and Development Tax Credit scheme has been offered by the government since 2004 and is one of the most generous in the world. Eligible companies can claim a tax credit of 25% on all qualifying R&D expenditure, on top of the standard 12.5% deduction. So in fact, as much as €37.50 for every €100 of applicable R&D expenditure can be claimed back.
The purpose of the credit is to encourage company investment in R&D in Ireland. This not only keeps the country at the forefront of innovation, it also boosts company competitiveness and job creation.
As you can see, R&D Tax Credits represent a highly generous tax incentive indeed. But companies can only claim on qualifying R&D projects and expenditure that relate to the company's trade. Essentially, the innovative works need to bring an improvement in overall knowledge across the relevant field of research, not just benefit the company itself. Projects must also address an area of technological or scientific uncertainty where the outcome is unclear from the start.
What kinds of activities are eligible for R&D Tax Credits?
Companies based in Ireland typically receive R&D Tax Credits because they have:
- Directly contributed to achieving the technological or scientific advancement, or,
- Undertaken work that contributed indirectly to achieving the advancement.
Examples of direct activities
There are many direct R&D activities that would qualify a company for R&D Tax Credits. However, key ones include:
- Technological or scientific planning
- The design or adaptation of materials, software or equipment
- Technological or scientific design, analysis and testing
If you would like to discuss your own company’s direct R&D activities with us, please do contact our team for advice.
And what about indirect activities?
Again, there’s a large range and they must have been undertaken purely for the purposes of R&D. However, examples of indirect activities include:
- Indirect supporting services to the R&D project, for example security, clerical or maintenance work
- Information services, for example preparing R&D reports
- Ancillary services, for example the lease of laboratories and equipment.
Again, if you’re unclear please do speak to us - we have years of comprehensive experience in this area and are here to help.
It doesn’t have to be brand new either!
Your R&D project doesn’t have to bring about something new developed from scratch. It could simply mean taking an existing product, service or process and improving it. Likewise, it could involve experimentation into sustainable packaging or more cost-effective materials.
As long as your company keeps comprehensive records from the start that back up R&D Tax Credit eligibility, then you’re well on the way to a claim.
Types of expenditure
Expenditure that will attract R&D Tax Credits includes (but certainly isn’t limited to):
- Employee-related costs, such as wages, company pension contributions, employer's Pay-Related Social Insurance (PSRI), health insurance and bonus payments
- Costs for overheads specifically relating to the R&D project. This would be utilities, power, materials and other consumables
- Certain software costs (for example if software has been created specifically to facilitate the R&D project in question)
- Costs relating to externally provided workers, freelancers, consultants and subcontractors
- Payments made to clinical trial volunteers
This is just a guide containing the main expenditure types. When you use the Tax Cloud portal for your claim, we’ll make sure all your relevant expenditure is included with nothing missed off.
Expenditure in more detail
Getting your head around the common eligible costs can be tricky. However, the two biggest grey areas our clients most often struggle with are staff costs and costs relating to consumables. Here we’ve looked more closely at these two key areas, but again please do speak to us about your individual R&D work so we can advise you.
Apportioning and accounting for staff time and costs is something we get asked about all the time. Eligible expenditure includes salaries, employer pension contributions and PSRI. However, non-cash benefits-in-kind like dividends can’t be included.
Note too that if an employee only spends part of their working hours on R&D project work, their time and costs must be apportioned. This is often challenging to do, which again is why it’s so important to work with R&D tax experts like ourselves.
Any staff performing 'supporting' and 'ancillary' roles should only be included if they are directly supporting an eligible R&D project. Again, their time and costs will need to be apportioned.
Materials and consumables
Only materials and consumables that have been “transformed” or used up in the course of the R&D project itself can form part of an R&D Tax Credits claim. They must be items which were transformed or consumed so that they were no longer usable in their original form. These would be things like:
- Electricity and gas
- Chemical substances
- Certain electrical components
Don’t forget: Any transformable materials or consumables that are included in a product that is sold, hired or transferred cannot be included in an R&D Tax Credit claim.
Claiming R&D Tax Credits is simple with the Tax Cloud portal
If you believe your company may be eligible for R&D Tax Credits, we strongly recommend taking a look at our R&D Tax Credits page. Once you’ve ascertained your eligibility (and our specialist team will be pleased to advise you on this if needed), the easiest, best value way to make your claim is using the Tax Cloud portal.
Designed by the R&D tax and funding experts at Myriad Associates, the Tax Cloud portal will guide you through your claim step by step. Once you’ve signed up free, you’ll be asked to outline your project so we can check you’re definitely eligible (so no wasted time). Then follow each step to make your claim, adding in your figures and completing your technical report.
The next stage of the application doesn’t “unlock” until you’ve submitted - and we’ve checked - the last one, so you always know you’re on the right track. We’ll also double check everything, and make sure your claim’s maximised, before it’s finally sent to Revenue inspectors.
Try the Tax Cloud portal for businesses today or call our team on +353 1 566 2001.
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