R&D Tax Credits
Claiming R&D Tax Credits in Ireland can be daunting. So the Tax Cloud team has put together our quick guide to help you discover more about the R&D Tax Credits scheme and how your Ireland-based company can claim.
The R&D Tax Credits scheme was unveiled by Revenue back in the early 2000s. It has since proven to be a popular (and lucrative) way of rewarding companies to take on bold innovative work.
The credit is calculated at 25% of eligible expenditure and is used to reduce a company's Corporation Tax (CT). The 25% R&D tax credit is available on top of the 12.5% trading deduction available for revenue expenditure.
Where a company has insufficient Corporation Tax against which to claim the R&D tax credit in a given accounting period, the tax credit may be credited against the Corporation Tax for the preceding period, may be carried forward indefinitely or, if the company is a member of a group, allocated to other group members. The R&D credit can also be claimed by the company as a payable credit.
The current R&D tax credit rate is calculated at 25% of qualifying expenditure and is used to reduce a company's Corporation Tax (CT) and the good news is that R&D Tax Credits for SMEs was increased to 30% for accounting period starting on or after the 1st January 2020.
All companies in the Republic of Ireland may be eligible for R&D Tax Credits, regardless of size, industry or profitability. As long as it’s registered for Irish Corporation Tax, and eligible research and development work has been undertaken then a claim is likely.
Eligible R&D projects include:
- Developing new products, services or processes
- Changing or modifying a product or service that already exists.
If you are developing a new product, service or process that requires an advance in technology - or significantly updating an existing one - then you could well have a claim.
When working out whether innovative work is actually R&D, ask yourself one question: Was the outcome of the project uncertain, even for professionals in the field, right from the beginning? In other words, was a financial risk taken on a project that may have not been achievable?
If you’re able to clearly show that your project has gone beyond simply applying technologies already in existence, then R&D Tax Credits are likely to follow.
Revenue is responsible for monitoring and processing all claims for R&D Tax Credits. Claims can also be backdated up to 12 months after the end of the accounting period during which the R&D expenditure occurred.
Although you don’t legally have to, the Tax Cloud team strongly recommends you complete an R&D technical report as part of your claim. This serves to justify to Revenue inspectors the specific technological or scientific challenges that were tackled, as well as to clarify the advancements made.
When you make your claim through Tax Cloud, our expert team will also help you optimise your claim, so no costs are inadvertently left out. In fact, we’re proud to be able to boost claim values far higher than going it alone - often by up to 300%.
R&D Tax Calculator
Using the calculator below will provide you with an estimate of the corporation tax savings that you may receive from Revenue as well as the cost for using Tax Cloud.
How Tax Cloud can help you
- Two advisors for every claim
- R&D tax claim specialists
- 100% success rate & no claims reduced by Revenue
- Only pay when claim is processed
- No hidden or upfront fees
- No long term tie-in's (current period only)
- No face to face meetings required
- Auto generation of an Revenue compliant claim report
- No extra fee for chasing or responding to Revenue
- One portal that contains all your claim information
- Multiple team log-ins
- Xero Integration
Our team is proud of the tens of thousands of euros we’ve helped put in the pockets of companies in Ireland.
We are respected and trusted in our industry; many of our clients come back year after year because they know Tax Cloud gets results. They also know that every penny of their eligible expenditure will be accounted for, so nothing is left on the table.
Tax Cloud’s reputation is first class and we’re pleased to be delivering maximised R&D tax claims for companies in IT, communications, software, digital design, pharmaceutical, manufacturing, engineering, food and beverage, immersive technology, supply chain management and many more.
Tax Cloud FAQs
We strongly recommend submitting your R&D Tax Credit claim to Revenue as quickly as possible. However, claims may be backdated up to 12 months after the end of the accounting period during which the R&D expenditure took place.
The R&D Tax Credits scheme is one of the most generous tax relief schemes in Ireland. But despite this (and the fact it’s been around so long) far too many companies still don’t know they can claim. Some have even been misinformed along the way by well-meaning accountants. Many companies simply aren’t aware the scheme exists at all - and this is huge missed opportunity.
Essentially, if your technical lead (the R&D manager, lead developer or lead engineer) is not readily able to overcome the scientific and/or technical challenges your project tackles, then an R&D Tax Credits claim is likely to succeed. This is particularly true if experts in the field are also not sure what the outcome of the research will be.
To qualify for R&D Tax Credits in Ireland, a project must have been scientifically or technologically investigative or experimental in one of these areas:
- Basic research
- Applied research
- Experimental development
The project itself doesn’t have to have been successful in its ultimate goal. There just needs to have been a scientific or technological uncertainty that wasn’t easily solvable from the outset.
A broad range of R&D expenditure can be claimed, as long as it is exclusively and wholly related to the R&D work. Common eligible costs include:
- Employee and staffing costs. This would be gross pay, bonus or overtime payments, pensions and health insurance for example
- Money paid to agency staff
- Royalty payments
- R&D completed as part of an existing trade
- Pre-trading expenditure
- Payments to individual consultants
- Materials used in R&D activities which may then be sold on
This is by no means an exhaustive list, but it gives you an idea of the kinds of costs that can be claimed. When you use Tax Cloud to claim R&D Tax Credits, our team will help you ensure none of your specific costs are missed off.
Once you have submitted your claim, Revenue R&D specialists will go through it with a fine-tooth comb. Firstly it will be risk assessed to determine the level of review that will need to be made for any further claims you make later. If Revenue inspectors have any questions or issues, they will then raise an enquiry which will be received by the applicant in writing.
Revenue is within its rights to investigate your company’s wider tax affairs if deemed appropriate. This is why it’s extremely important to include an R&D technical report. It will not only support your project and costings, it will also justify to Revenue why you believe the award should be given.
Qualifying activities must have been carried out by the claimant company, not by another party. However, there are a couple of situations where a company that hasn’t carried out all the R&D work itself can still claim R&D Tax Credits:
1. The company has paid a sum to a university or academic institute to carry out qualifying R&D work, in addition to the company’s own R&D activities. Relief will be capped at 5% of the expenditure incurred by the company itself on R&D activities, or €100,000, whichever is more. However, this is subject to the company incurring at least the same level of expenditure on eligible activities which it carried out itself.
2. The company has paid a sum to another person who isn’t a university or academic institute. However, relief can only be claimed if the third party is not connected to the company. Relief will again be capped - this time to 15% - of the expenditure incurred by the company itself on eligible R&D activities, or €100,000, whichever is more. This is also subject to the company incurring at least the same level of expenditure on relevant R&D activities that it has undertaken itself.
Our team will be happy to discuss this with you if anything is unclear. Feel free to get in touch.
Yes, it can. The whole idea behind R&D Tax Credits is that a technological or scientific discovery - however large or small - is made. As long as this happens, it doesn’t matter whether the objectives of the project itself were actually met or not. The project could even be abandoned halfway through; as long as an advancement has been made then R&D Tax Credits can follow.
R&D tax claim success hinges on excellent record keeping. Companies should make sure:
- All costs (and what they relate to) are recorded consistently and in a timely manner
- All documents and receipts relating to R&D work are retained
- They can show evidence of any previous grants, claims or state aid if applicable
Companies claiming R&D Tax Credits must also be able to demonstrate the integrity of the records, including relevant dates, times and names of people involved.
Software development is one area of the economy that strongly lends itself to R&D work. Common example of projects include:
- Cutting-edge software for new projects, or improved functionality for existing R&D projects;
- Extensions to programming languages, database software or operating systems;
- Software and hardware integration platforms;
- Tools that improve the functionality of an operating system or application software programs;
- Software development tools, for example tools to port data across platforms, process images or for character recognition;
- Innovative ways of capturing, storing, manipulating, protecting and sending data;
- Software created to run new computer hardware;
- Novel data management techniques, for example new object representations and new data structures;
- Software to run on devices with pre-installed operating systems, such as handheld GPS, mobile phones and tablets.
As well as those in the software sector, engineering and manufacturing companies are also big claimers of R&D Tax Credits in Ireland. Eligible projects include:
- Equipment and tooling fixture design and development;
- Developing improved or second-generation products;
- Designing and evaluating process alternatives;
- Innovative product development using CAD tools;
- Building bespoke computer numerical control programs;
- Designing innovative manufacturing equipment;
- Prototyping and three-dimensional solid modelling;
- Creating innovative programmable logic controllers;
- Designing and developing innovative and more cost-effective operational processes;
- Integrating new materials to improve manufacturing processes and product performance;
- Designing, building, and testing product prototypes;
- Evaluating and determining the most efficient flow of material;
- Devising processes that would meet increasing regulatory requirements; or,
- Using automation to streamline manufacturing processes.
R&D projects typically involve people from across the organisation. Roles may include an R&D Manager, a Lead Developer, Engineers, Project Co-ordinators, CAD Engineers, Cost Accountants, Quality Control and Testing specialists, as well as other senior management team members.
Revenue usually pays out in around 4 weeks - sometimes less, sometimes more. The exact amount of time it will take depends on the nature and complexity of the claim itself, and whether Revenue inspectors request additional information.
Peak accounting times in the year are also busier so can slow things up. The Tax Cloud team will be in touch once your award has been processed.