What Do Irish Companies Spend Their R&D Tax Credit Award On?

Funding innovation now and into the future

Having an innovative business idea for something new and amazing is great - but turning it into a reality costs money.

However, did you know you can actually recoup a large amount of your R&D expenditure in the form of R&D Tax Credits?

Launched just after the millennium, the Irish government devised its R&D Tax Credits scheme is for exactly this purpose - to encourage business innovation by helping out with the costs.

Here we look in more detail at R&D Tax Credits in Ireland and how businesses across the country are using the resultant cash to their advantage.

First off, what is the R&D Tax Credits scheme?

Research and Development (R&D) Tax Credits are paid out in respect of certain allowable costs incurred during a company’s R&D process. The award is administered as a saving against the current year’s Corporation Tax if the company is profitable, or as a series of cash instalments if it is not. As long as an advancement has been made in science or technology that wasn’t obvious from the start, then the first steps towards qualifying have been met.

What costs can be included in an R&D Tax Credit claim in Ireland?

Luckily the scope of projects and costs, is incredibly broad. Costs that can form part of your R&D Tax Credits claim include:

• Employer costs like staff wages and pension contributions
• Developing specific software needed to facilitate the R&D project
• Overheads like gas, water and electricity (although these will need to be apportioned so you’re only claiming for the amounts you actually used up in the R&D process)
• Materials (again, only those used up in the R&D project)

This is just a tiny sample and our R&D specialists will check your project for all eligible costs as part of the Tax Cloud service.

How R&D Tax Credits can make a real difference to your business

Average R&D Tax Credit claims in Ireland currently sit at around €55,000 - money you won’t want to miss out on. Even the smallest of claims can generate a substantial return, with savvy companies ploughing it back into further R&D investment. This further generates R&D Tax Credits in future and so the cycle of innovation continues.

Not only will a constant innovation cycle make it more likely your business will thrive and grow into the future, it can also help you diversify your offering.

So what else do companies spend their R&D Tax Credits on?

Although the point behind R&D Tax Credits is for businesses to reinvest the money in further R&D work, companies are actually entitled to spend it as they wish. Many decide to pay off some debts or meet the staff wage bill (especially in the face of modern business challenges). We’ve also found that a lot of businesses will split their award up, reinvesting some of it into R&D, saving some in reserves and using the rest for debt repayments or other pressing business costs. Again this is fine.

And what else?

In addition to the above, companies often:

Take on subcontractors

Times are tough and many firms aren’t keen to increase their permanent head count even if there’s plenty of work to be done. A popular way forward is to take on subcontractors or freelancers, therefore investing in expert work without the commitment.

Devise new processes

Some companies use the money to develop new systems and processes, therefore increasing their productivity. Not only can this increase efficiency but profitability too.

Buy new plant, equipment and machinery

Old equipment and machinery can be costly to maintain and inefficient to run. Many companies therefore decide to invest their R&D Tax Credits award into new facilities that increase productivity and lower costs. This could be either renting the new equipment or purchasing it.

How do I claim R&D Tax Credits?

Although the R&D Tax Credits scheme has existed in Ireland for almost two decades now, the rules around its administration are regularly updated. Over the years this has made the process of claiming notoriously complex, with many hoops to jump through. That is of course, unless you use a market-leading claims portal like Tax Cloud.

How Tax Cloud works

As the name suggests, Tax Cloud is a cloud-based portal that means you can work on your R&D Tax Credits claim 24/7 on any internet-connected device. Once you’ve signed up (it’s free!) it’s simply a case of working your way through each stage of the process, and once you’ve completed a section our specialist team will check it over thoroughly for you. Only then will the next stage “unlock”.

First off, we’ll establish your eligibility in terms of both your business and your project (so no wasted time from the outset). Once eligibility has been established, you’ll then enter in your own R&D expenditure figures to work out your claim value. Again, we’re on hand at all times if you have any questions. We’ll also go through your project in detail to make sure no costs have been missed off, so helping you to maximise your payout.

Finally, you’ll need to include the kind of technical narrative that not only describes your project and its technical/scientific progress in detail, but also persuades Revenue inspectors that it’s worthy of the award. This again is where our team of experts can guide you, making sure all the necessary detail and supplementary evidence is included and there’s no superfluous extras.

Myriad Associates, the R&D tax experts behind the Tax Cloud, recently put together an article which may prove useful here: Why Is A Technical Report Important For My R&D Tax Claim?

Kick off your R&D Tax Credits claim today

The one thing we can’t highlight strongly enough is don’t make a DIY claim for R&D Tax Credits on your own. The process really isn’t straight-forward, especially if you’ve never claimed before, and the chances of over or under-claiming are high. Get it wrong and you could even attract some very unwanted attention from Revenue with an enquiry. Stressful, expensive and well best avoided.

So why not take the stress and hassle out of making an accurate, successful R&D Tax Credits claim that stands up to Revenue scrutiny. Sign up to the Tax Cloud portal for businesses today and get started on your claim.

Author Barrie Dowsett, ACMA, GCMA CEO, Tax Cloud