Claiming R&D Tax Credits for Buildings, Plant & Machinery

When we think of Research & Development (R&D) tax credits in Ireland, the focus often lands on software development, product innovation, or laboratory work. However, a lesser-known but highly valuable aspect of the R&D tax regime is the potential to claim relief on capital expenditures related to buildings, plant, and machinery.

For companies investing in physical infrastructure to support qualifying R&D activities, this can represent a significant tax-saving opportunity. For example, claiming for capital expenditure is a huge boon for companies in the manufacturing or pharmaceutical sectors.

The R&D tax credit is available to companies on top of any capital allowances claimed.

Costs for building or refurbishing a facility used for qualifying R&D can count as R&D expenditure. However, certain conditions must be met for these buildings to qualify.

All buildings and structures must be eligible for Industrial Building Allowances (IBAs). They are claimed through a slightly different process to plant & machinery and any other usual costs for R&D tax credits; where the rest of these costs are claimed through section 766C, building and structure expenditure is claimed through section 766D. The process is largely the same, just a different form.

You can claim the R&D tax credit on any new expenditure on:

• Construction
• Conversion
• Refurbishment

Of a building or structure (new or existing) that houses R&D activities. The R&D activities must represent at least 35% of the activities of the building across a period of four years beginning when the building is brought into use. In other words, the fact that some R&D happens in the building is not enough to qualify.

If the Covid-19 pandemic prevented you from meeting the four-year requirement, you can extend the period to five years to account for this year of lost R&D.

If your expenditure on buildings extends across multiple accounting periods, you can treat the expenditure as incurred on the date it was actually incurred, or when the building is usable.

You cannot claim for the costs of:

• Acquiring land for construction
• Any portion of the building that is not used for R&D
• Any expenditure on the building that is funded by grant aid or assistance
• Any expenditure that is also eligible under section 765 of the Taxes Consolidation Act (“Allowances for capital expenditure on scientific research”).

For example:

Company A spends €500,000 on land and €1,000,000 on the construction of a new R&D centre used exclusively for R&D. The construction took place in the accounting period ended 31 December 2024 (i.e., under the 30% R&D tax credit rate).

The company cannot claim for the land cost. It can claim for the construction costs, multiplied by the R&D tax credit rate (€1,000,000 x 30% = €300,000).

If the building is used for R&D and non-R&D activities, then a reasonable apportionment needs to be made to reflect the use of the building (for example, R&D staff costs vs non-R&D staff costs, or square footage used). You should keep records that back up the apportionment method you chose.

For example:

Company B spends €1,000,000 on a building that houses the R&D team as well as other teams. The expenditure occurs in the period ended 31 December 2024 (i.e., under the 30% R&D tax credit rate).

The company assesses that R&D staff costs account for 40% of the staff costs of the building, but the square footage of the R&D team’s area is 50%. Therefore, the company chooses the latter method and maintains records to demonstrate this square footage assessment.

Company B can therefore claim 50% of the construction costs at the 30% R&D tax credit rate (€1,000,000 x 50% x 30% = €150,000).

However, if the building is sold or stops being used for R&D purposes within 10 years of a claim being made, the R&D tax credit can be clawed back by Revenue.

Plant and machinery costs can qualify if the expenditure is also eligible for capital allowances. They are claimed as part of the

As with buildings and structures, if the equipment is used for R&D and non-R&D purposes, you’ll need to make an apportionment using a reasonable method. For example, a machine-hour allocation may be considered fair where a machine is used for both R&D and non-R&D.

Any expenditure on plant & machinery can be treated as having been incurred either on the date it was actually incurred (so long as it is brought into use within the next four years), or on the date it was brought into use.

Need some help sorting your R&D from your usual work? Not sure if you have captured all relevant costs? Get in touch with our experts at Tax Cloud.

We’re always happy to chat about the nitty-gritty of claiming R&D tax credits.

Author Barrie Dowsett, ACMA, GCMA CEO, Tax Cloud