Ireland’s R&D tax credit can return up to 35% of your qualifying spend on R&D, and healthtech and medtech companies are at the forefront of this incentive. This guide explains what counts in Revenue’s book, what doesn’t, and what you’ll need on file to back it up.
How does Revenue’s R&D test apply to healthtech and medtech?
Revenue applies the same test to every sector. Your work has to be systematic, investigative or experimental, sit in a recognised field of science or technology, and seek an advance in that field by resolving scientific or technological uncertainty. Our guide to Revenue’s definition of R&D goes through each part.
The question that decides most healthtech and medtech claims is this: could an expert in your field have worked out the answer at the outset? If a skilled device engineer or clinical scientist would have known how to meet your specification using established methods, the project isn’t R&D, however hard it was to deliver. If the answer wasn’t clear and you had to test your way towards it, you probably qualify.
Which healthtech and medtech activities usually qualify?
These are the areas where we most often see genuine uncertainty:
- Developing a new device, or improving an existing one, where it wasn’t clear you could meet the specification for accuracy, durability, biocompatibility or sterility
- Prototyping, verification and validation work where the result was uncertain, including design iterations that failed and had to be reworked
- Material, sensor or miniaturisation problems where known approaches wouldn’t deliver the performance you needed
- Formulation and drug-delivery development where stability or bioavailability was uncertain
- Process development where scaling up manufacture raised scientific or engineering challenges you couldn’t solve with standard methods
- Clinical trials that investigate whether a drug or device works, including Phases I to III
- Software and AI that does something new, such as diagnostic or monitoring algorithms where no established approach exists
What doesn’t qualify?
Being honest about this saves you time at claim stage, and it makes the rest of your claim easier to defend. These usually fall outside the credit:
- Routine quality control testing on a product that’s already in production
- Making a device to an established design using known processes
- Post-approval studies that don’t investigate a new scientific question
- Standard app or portal development using existing frameworks, such as a patient booking system
- Adapting an existing machine learning model to a new dataset without any real technical uncertainty
- Marketing, sales and other commercial work, even on a genuinely qualifying project
A medtech start-up is developing a wearable sensor and doesn’t know whether it can read a vital sign accurately through a new, flexible material. It builds and tests several versions before one meets the accuracy target, and that work can qualify. The same company later switches to a different approved supplier for the casing and runs routine batch checks. Those checks are quality control, and they don’t qualify.
Do clinical trials qualify?
Often they do. Clinical trials that investigate whether a drug or device works, across Phases I to III, are a common source of qualifying activity. Post-approval work is different, and only qualifies if it’s investigating a new scientific question.
Budget 2027 includes a change for regulated clinical trials. The fact that a trial is regulated will be able to satisfy the science test, which should cut the effort of showing it, particularly where your company takes part in a global trial. This is announced rather than law, and the detail will be added when Finance Bill 2027 is enacted, so don’t rely on it for any claim you’re preparing now. You’ll also still need to pass the accounting test and show that your costs are qualifying R&D expenditure.
If you pay a clinical research organisation or a university to run part of a trial, that spend is subcontracted work, and the amount you can claim is capped. See our guide to claiming for subcontracted work for how the cap works.
What happens to prototypes and devices you can sell?
This is the rule medtech companies most often get wrong. If it’s reasonable to consider that your R&D will leave you with a saleable product, you must deduct the lower of cost or net realisable value of that output from the materials you claim.
A company builds 20 units of a new device at €2,000 each, so €40,000 in total. Five are destroyed in testing and 15 are kept in good condition. At the outset, it was reasonable to expect the 15 would be saleable, and each would sell for more than it cost. The cost of materials for those 15 units, €30,000, comes out of the claim, leaving €10,000 that qualifies.
There’s an exception. If real uncertainty was still unresolved when you did the work, for example whether the device would perform as designed once built to final specification, it may not have been reasonable to expect a saleable product. In that case, the deduction doesn’t apply. Whichever way you land, write down your reasoning at the time. Our post on consumable materials explains the rule in full.
Which costs can you claim?
Once you’ve identified qualifying projects, these are the costs you can link to them:
- Staff costs for scientists, engineers and developers, for the time they spend on R&D
- Consumables, such as materials, reagents and power used directly in the R&D
- Plant and machinery used in the R&D (our guide to buildings, plant and machinery claims)
- Software licences used in the R&D
- Subcontracted R&D, within the cap
Indirect overheads don’t qualify, even on a project that does. Our guide to what you can’t claim lists the main things to consider.
What evidence should you keep?
Revenue wants to see what you were trying to achieve, what was uncertain, what you tried, and what you found. Healthtech and medtech teams are already used to documenting their work, so much of this exists: test protocols and results, design reviews, lab notebooks, trial records, and notes on why an approach changed or was dropped. Pull these together into a strong technical report, and keep records of who worked on each project, even if you don’t use formal timesheets.
If you’ve never claimed before, or haven’t claimed for some time, you’ll also need to send Revenue a pre-filing notification before you submit.
Key takeaways
- Uncertainty is the test. If a competent professional would have known how to get there, it isn’t R&D, however complex the device or software.
- Failure helps your case. Iterations that didn’t work are some of the best evidence that the outcome was genuinely uncertain.
- Clinical trials can qualify, with limits. Subcontracted trial costs are capped, and the Budget 2027 changes won’t apply until the Finance Bill is passed.
- Saleable output reduces your claim. Record your reasoning at the time about whether you expected to sell what the R&D produced.
- Routine quality control and commercial work stay out. Keep them separate from your R&D records.
If you’re not sure whether a project in your pipeline qualifies, get in touch and we’ll talk it through with you!
