The Irish R&D tax credit can be claimed in multiple ways, depending on what suits the business.
Knowing how to claim your entitlement can be tricky, with recent changes made affecting both the credit rate and the upfront cash companies can receive.
How much can you claim?
Revenue has increased the R&D tax credit rate in stages, a move welcomed by many innovative Irish companies.
- Accounting periods beginning before 1 January 2024: You can claim 25% of eligible costs.
- Accounting periods beginning on or after 1 January 2024 and before 1 January 2026: You can claim 30% of eligible costs.
- Accounting periods beginning on or after 1 January 2026: You can claim 35% of eligible costs.
Eligible costs remain the same, despite the changes to the scheme.
Worth noting for companies with dedicated R&D staff: from accounting periods beginning on or after 1 January 2026, 100% of an employee's emoluments qualify as an R&D cost if at least 95% of their time is spent on qualifying R&D activities. This removes the need to apportion salary for admin or other minor non-R&D work, which is particularly useful for companies that employ people entirely to work on R&D projects.
How is the credit paid out?
Revenue will pay your credit in three annual instalments. You must choose how you want to receive the credit for each instalment. You can elect to use the credit, or a portion of the credit, to offset tax liabilities (like corporation tax, VAT, or employment taxes). Alternatively, you can receive the credit in cash from Revenue.
Larger, more established companies will often use the credit to reduce their tax bill. However, startups or loss-making companies benefit more from a cash repayment, which helps with cash flow when it's most needed.
The credit is paid in three annual instalments as follows:
- Year 1: The greater of 50% of the credit, or the first-year threshold (see below)
- Year 2: Three-fifths of the remaining balance
- Year 3: The remaining balance
The first-year threshold depends on your accounting period:
- Accounting periods beginning on or after 1 January 2024: €50,000
- Accounting periods beginning on or after 1 January 2025: €75,000
- Accounting periods beginning on or after 1 January 2026: €87,500
For companies where the total credit does not exceed the relevant first-year threshold, the full amount can be settled in Year 1. That means a company with an accounting period beginning 1 January 2026 and a total credit of €80,000 would receive the entire amount upfront, rather than waiting three years.
This makes a material difference for smaller claimants. For companies with claims over the threshold, 50% goes out in Year 1 and three-fifths of the remaining balance in Year 2, so the majority of the credit is received within the first two years.
Group companies can surrender excess credits to other group members. If you want the credit to go to a specific entity within the group, you need to make an election to that effect when submitting your claim. Groups should decide in advance where they want the benefit to land and ensure the election is included correctly in the claim.
Rewarding key employees
In some cases, companies can use part of their R&D tax credit to reward key employees. This allows those employees to benefit from a lower effective tax rate, potentially reducing it to 23%, compared to the 40%+ they would otherwise pay.
This is only an option for companies that choose to treat the credit as an overpayment of tax (either in part or fully); those companies may then surrender any excess to qualifying key employees. To be eligible, employees need to spend at least 50% of their time on qualifying R&D activities.
For companies working to attract and retain top R&D talent, this is a genuine benefit worth factoring into how you structure your claim.
Pre-trading expenditure
Even if your company hasn't started trading yet, you can still benefit from Ireland's R&D tax credit.
If you've incurred R&D expenses before officially starting to trade, you can claim those costs within the accounting period in which you first start trading. This is especially helpful for startups, allowing them to recover some early investment and maintain cash flow while getting the business off the ground.
Submitting your claim
Your claim is submitted through your Corporation Tax Return, or CT1. You'll need to declare how you want to claim the credit and, if it's your first claim or your first in a while, you'll need to submit a pre-filing notification. Companies need to submit their claim within 12 months of the end of their accounting period.
If you are receiving your credit in three instalments, you’ll need to provide the amounts your due on three different CT1s: the first CT1 with your initial claim, then the two CT1s that follow.
Key takeaways
- The credit rate is now 35% for accounting periods beginning on or after 1 January 2026, up from 30%.
- Credits are paid in three instalments: 50% in Year 1 (or the first-year threshold, whichever is greater), three-fifths of the remaining balance in Year 2, and the remainder in Year 3.
- The first-year threshold is €87,500 for accounting periods beginning on or after 1 January 2026, meaning more companies can receive their full credit upfront.
- Group companies must elect to direct surrendered credits to a specific group member; without an election, Revenue apportions the credit by R&D activity across the group.
- Key employees who spend at least 50% of their time on qualifying R&D can benefit from a reduced effective tax rate when their employer surrenders excess credits to them.
If you're not sure how to structure your claim to get the most from the credit, get in touch with our team. At Tax Cloud, our tax and technical experts keep on top of legislative changes so you don't have to.
