If you're developing new products, improving processes, or solving technical challenges, you're likely doing qualifying R&D work and therefore, can benefit from Revenue’s generous R&D tax credit scheme. But is the payoff worth the paperwork?
For most innovative Irish companies, the answer is yes. However, there are some situations for companies that could not be worth it. You need to balance the admin with the benefit you could receive. Having a clear idea of what’s involved in an R&D tax credit claim is the first step to making your decision.
Understanding Ireland's R&D Tax Credit Scheme
Ireland's R&D tax credit scheme is one of the most generous in Europe, designed to encourage innovation across all sectors. Under Revenue’s guidelines, qualifying R&D must involve activities that seek to achieve scientific or technological advancement through the resolution of scientific or technological uncertainty.
The financial benefit is substantial: you can claim a 30% tax credit on qualifying R&D expenditure, which is increasing to 35% with the government’s Budget 2026 announcement. This credit can be offset against your corporation tax liability or, as many prefer, claimed as a cash refund if you don't have sufficient tax to offset.
Key eligible costs include:
- Employee salaries, including employer PRSI (usually the largest R&D cost)
- Materials and consumables used directly in R&D
- A portion of overhead costs
- Payments to subcontractors
- Software costs
However, it's crucial to understand that the value of the credit relies on you spending money on your R&D project. You can't claim credits on activities you haven't actually paid for or on work that doesn't meet Revenue's definition of R&D.
What Are the Benefits of Claiming R&D Tax Credits?
The most obvious benefit is cash back in your business. Let's say you spent €100,000 on qualifying R&D activities. With the current 30% rate, that's a €30,000 tax credit, rising to €35,000 once the new rate takes effect.
Beyond the immediate financial impact, R&D tax credits improve your cash flow. You can elect to claim the credit as a cash payment over three years. This means you're bringing money into the business across multiple years, alleviating funding stresses across a longer period. However, Budget 2026 also announced an increase in the first-year threshold, allowing companies to receive up to €87,500 of their claim in the first year; this is critical to SMEs with small projects, allowing them to do more with their claim in the short term.
There's also a competitive advantage in claiming. Companies that systematically document their R&D activities and claim credits are often more disciplined about tracking innovation. This documentation can prove invaluable when seeking investment, applying for grants, or demonstrating your technical capabilities to potential clients.
Finally, R&D tax credits support business growth. The cash injection can enable you to take on more ambitious projects, hire that additional engineer you've been considering, or invest in new equipment. It's essentially the Irish government co-funding your innovation at a rate of 30%.
What Are the Drawbacks of Claiming R&D Tax Credits?
While the benefits are clear, claiming R&D tax credits isn't free. The most significant cost is time. You'll need to learn how the scheme works, identify which of your projects qualify, and apply these rules to your specific activities. This takes effort, particularly in your first year of claiming. Depending on your claim’s size and complexity, this could be anywhere from 10 hours of work across a week to many months with many teams involved.
You'll also need to get your technical team involved to provide detailed descriptions of the challenges they faced and how they resolved them. This can be tricky when engineers are often busy with current projects, not past documentation.
If you decide to use specialist advisers, there's a cost involved. Full-service consultants typically charge success fees ranging from 15-25% of your claim value. While this removes the administrative burden, it also reduces your net benefit. Some businesses find the trade-off worthwhile; others prefer to retain full control and make the most of their return.
There's also a risk element. If you don't properly document your R&D activities or if your claim doesn't align with Revenue's guidelines, you could face an audit or have your claim rejected.
The administrative burden extends beyond the claim itself. To make claiming easier in future years, you need to maintain proper records throughout the year. Contemporaneous documentation of technical challenges, project plans, and meeting notes make the claiming process easier by orders of magnitude.
Finally, there are situations where claiming simply isn't worth it. If your qualifying R&D expenditure is minimal—say, under €15,000 annually—the time and effort required is more than likely to outweigh the €4,500 credit you'd receive. You need to weigh the administrative cost against the benefit.
Common Misconceptions Holding Companies Back
One of the biggest myths stopping companies from claiming is "we're too small." There's no minimum company size requirement for R&D tax credits. Whether you're a two-person startup or a 50-person scaleup, if you're doing qualifying R&D work, you can claim. Many successful claims come from small, focused teams pushing technical boundaries.
Another common concern is "it's too complicated." While the scheme does have detailed requirements, with proper guidance, it's manageable. The key is understanding what Revenue wants to see and structuring your documentation accordingly. You don’t need to write an academic paper. Clearly explaining what technical problem you faced, why it was uncertain, and how you systematically tried to solve it is enough to satisfy Revenue’s requirements.
Many businesses also believe "we don't have time." It's true that claiming requires time investment, but this can be drastically reduced with proper planning and contemporaneous documentation, you can make the process relatively straightforward. If you document your technical challenges as they happen (even brief notes in project management tools or technical meetings) you'll have most of what you need when claim time comes around.
Tax Cloud offers a hybrid option that addresses many of these concerns. You get professional support and guidance to ensure your claim is robust and compliant, but at a lower price than full-service advisers (10% of the tax benefit for most claims). You keep control within your company while benefiting from expert review and validation. It's a middle ground that works well for companies that want to maximise their return while ensuring they're on the right track.
Are R&D Tax Credits Right for Your Business?
To assess whether your activities qualify, start by asking yourself three questions:
- Are we trying to achieve something that isn't readily deducible by a competent professional in our field?
- Are we working systematically to overcome scientific or technological uncertainty?
- Are we creating new knowledge or capabilities that didn't exist before in our business?
If you answered yes to these questions, you likely have qualifying R&D activities.
Next, calculate the potential return versus the effort required. Multiply your estimated qualifying expenditure by 30%. If this figure is substantial relative to your business size (and particularly if it represents meaningful cash that could fund further development), it's probably worth claiming. Consider also whether you have the internal capacity to manage the claim process or whether you'd need external support.
If you decide to proceed, start by reviewing your current and recent projects for R&D activities. Gather any existing documentation—project plans, timesheets, technical specifications, meeting notes, or development logs. The sooner you start documenting your R&D work, the easier future claims become. Then you need to start preparing your claim by working out what costs you can claim and writing up a technical narrative to evidence your eligibility.
Making Your Claim
For most Irish companies doing genuine innovation, R&D tax credits are worth claiming. The financial benefit, combined with improved documentation discipline and competitive advantages, typically outweighs the time and cost investment, especially once you've gone through the process once and established good documentation practices.
If you'd like guidance on whether your activities qualify or support in preparing a robust claim, speak with Tax Cloud. We can help you assess your eligibility and ensure your claim makes sense for you.
