One of the most valuable features of Ireland's R&D tax credit scheme is its flexibility through its three-instalment payment system. You can receive your credit as either a direct cash payment from Revenue or as an ‘overpayment of tax’ (which reduces your tax liabilities).
In this guide, we explain exactly how the three-instalment system works, what changed in Budget 2026, and how your business can make the most of it.
How the Irish R&D Tax Credit Works in 2026
Ireland's R&D tax credit is administered by Revenue and provides a credit of up to 35% on qualifying R&D expenditure. This means that for every €100 your company spends on qualifying R&D activities, you can receive a €35 credit against your corporation tax bill.
To make a claim, you need to establish which of your projects qualify under Revenue’s definition of R&D, then work out which costs relate to that project. Once you have your total qualifying costs for a project, you can apply the relevant R&D tax credit rate and send off your claim to Revenue with your CT1.
Revenue then pays out your credit depending on the method you requested in three annual instalments.
How Can You Claim Your R&D Tax Credit?
When you submit your claim, you need to specify on your CT1 how you wish for the credit to be paid out. You’ll include this on three different CT1s; the first being for the period you are claiming for, then for the two following periods.
You can choose to receive your R&D tax credit as:
- An “overpayment of tax”, which results in the credit being offset against your tax liabilities
- A payable cash credit from Revenue
In either case, your credit is paid out in three instalments. You can even mix and match the approaches, choosing cash for one period and tax reductions in the next.
For companies whose tax liability is less than their credit, they can apply a portion of the credit to their tax liability and the rest to be paid in cash. This is flexibility that Irish SMEs could really use.
If you use part of your R&D tax credit to reduce your company’s tax bill and there’s still some left over, you may be able to surrender that remaining amount to key employees. Note that the amount you surrender cannot be more than the company’s corporation tax liability. This is a great way to reward your key employees for their hard work on your projects while attracting top talent proportionally to the R&D you’re doing.
The final exception is for companies with claims still outstanding from the previous R&D tax credit scheme. This is only relevant to companies who have leftover credit from a claim made in an accounting period beginning before 1 January 2024. Revenue no longer allows for remaining R&D tax credits from claims made under the previous schemes (i.e., section 766 and/or 766A) to be claimed as a cash credit. This credit can only be used to reduce your CT bill.
Instalment 1: Paid in Year 1 (the year the claim is made)
In the first year, Revenue pays the greater of:
- the first-year threshold, or
- one-third of the total excess credit
The excess credit means any credit remaining after you use it to offset your CT liabilities for the year (if you do).
The first-year threshold amount 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 smaller companies whose total credit does not exceed the first-year threshold, the full amount can be paid in Year 1 under the updated rules.
This upfront payment is particularly valuable for early-stage and high-growth businesses that need cash to fund their next phase of R&D. It also saves companies with small claims splitting out their claim value into three years of waiting.
For example:
Company A spends €250,000 on qualifying R&D in 2026. At the new 35% rate, the R&D tax credit is €87,500.
Under the updated first-year threshold, the full credit could be paid in Year 1, as it does not exceed €87,500. No need to wait three years.
Instalment 2: Paid in Year 2
If your claim is bigger than the first-year threshold, even by a little, you’ll need to claim the excess in two extra annual instalments.
In the second year following the claim, Revenue pays a further instalment of three fifths of the remaining balance after the first instalment was paid out.
This second instalment helps maintain cash flow while you continue R&D investment.
Instalment 3: Paid in Year 3
Any remaining balance of the excess credit is paid in the third year.
For example:
Company B has a credit of €300,000 for an accounting period beginning 1 January 2026. In the first year, Revenue pays out the greater of 50% of the credit or the first-year threshold (€87.5k in this accounting period). This is a first instalment of €150,000, as 50% is the greater.
In the second year, there is €150,000 remaining of the credit. Three-fifths of this amount is €90,000, so Company B can receive this amount in the year after the claim is made.
In the third year, the remaining balance is €60,000.
How Do You Claim For Multiple Accounting Periods?
For companies claiming for longer R&D projects, you might be wondering how all these instalments interact.
Your CT1 has fields for each of the three instalments; it’s on you to ensure that the correct figures are entered for each instalment. However, if you have your workings clearly defined in your own records, you could easily claim three different periods in a single year.
For example:
Company C has three R&D tax credit claims of €300,000 for the accounting periods running the calendar year of 2024, 2025 and 2026.
For 2024, Company C claims €150,000 (50%) in the CT1 for the 2024 R&D claim.
For 2025, they claim €150,000 for the 2025 claim, and €90,000 (three-fifths of the remainder) for the 2024 claim.
For 2026, they claim €150,000 for the 2026 claim, €90,000 (three-fifths of the remainder) for the 2025 claim, and €60,000 (the final remainder) for the 2024 claim.
If you decide to reduce your CT with the first instalment, the amount you offset can be taken into account when calculating your preliminary corporation tax; this is only the case for the first period.
Can You Surrender R&D Tax Credits Within Groups?
Yes, companies can surrender certain R&D tax credits to other group members, but they need to be proactive about how that surrender is made. If the surrendering company wants the credit to go to one specific group member, it must make an election to that effect. Without that election, the credit is automatically apportioned across eligible group companies based on the level of qualifying R&D activity carried on by each company in the group.
In practice, that means groups should decide in advance where they want the benefit to land and make sure the election is included correctly in the claim. If they do nothing, Revenue will not simply leave the credit with the surrendering company or direct it to a preferred entity by default; instead, the amount is split by reference to R&D activity across the group.
How to Access the Payable Credit: Practical Steps
- Identify and document your qualifying R&D expenditure. This includes maintaining clear records of project activities, staff time allocations, and associated costs.
- Prepare a technical narrative explaining how each project meets Revenue's definition of qualifying R&D: specifically, the scientific or technological uncertainty your team sought to resolve.
- File your R&D tax credit claim with Revenue as part of your corporation tax return (Form CT1). The claim must be submitted within 12 months of the filing deadline for the relevant accounting period.
- Work out your three instalment values, if your claim is bigger than the first-year threshold. You don’t need to decide how you’ll claim the second and third portions yet! Keep these workings safe so you don’t miss out the next year.
- Claim for your first year, deciding whether to claim the instalment as cash or as an overpayment of tax (or to surrender to key employees).
- Don’t forget your second and third instalments when preparing your CT1 in the next accounting periods!
Key Takeaways
- You can claim your R&D tax credit in three instalments, either in cash or as a reduction of your Corporation Tax.
- The first-year payment threshold has increased to €87,500 in Budget 2026, meaning more companies receive a larger upfront cash payment.
- You must declare how you want to receive your credit in your CT1.
- If surrendering in a group, you can elect to have your credit distributed however you like between group companies.
Start Your Irish R&D Tax Credit Claim with Tax Cloud
Tax Cloud makes it straightforward for Irish SMEs to claim the R&D tax credit they are entitled to, including accessing the payable credit and three-instalment payment system. Our platform guides you through each step, from identifying qualifying expenditure to filing with Revenue.
Get in touch with our team for more details on how this system works or for a demo of the Tax Cloud platform.
