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The extra financial injection that R&D tax credits bring can help manufacturing companies address the ever-changing industry standards and consumer demands placed on them.
R&D Tax Credits are a highly prized incentive for Irish companies, not least those in the manufacturing sector. The extra financial injection they bring can help manufacturing companies specifically to address the ever-changing industry standards and consumer demands placed on them. Furthermore, there is relentless pressure from new entrants into the market, with a huge range of other factors also contributing to a need for innovation, technological advancement and reinvention.
Across the manufacturing sector, product improvement goes hand-in-hand with a competitive edge, driving down manufacturing costs and successfully meeting challenges that influence productivity. Additionally, certain areas of manufacturing are subject to strict consumer legislation, for example around safety and usability, and innovation is essential in overcoming these challenges going forward.
Although manufacturing covers a huge spectrum of business areas, some have more requirement to innovate more extensively and at a faster pace than others. We have found these tend to be Irish companies engaged in:
R&D Tax Credits encourage companies to develop and redevelop new products through significant tax refunds and cash credits. This money can mean massive help towards R&D costs, again boosting competitiveness both within the business and the wider Irish economy.
We have worked with many manufacturing companies over the years and have found a few main issues that regularly come up. These are often around the following:
How to translate innovation into growth: Implementing new techniques can be a challenge. The money and time required to invest in change is especially difficult for SMEs and micro businesses to find, and they have often cited a difficulty in accessing finance, talent and technology.
Company culture: Risk-averse attitudes and a lack of motivation can be prevalent in some areas of manufacturing, especially amongst family-run venues and older workforces. This can mean a lack of appetite to innovate which ultimately holds the company back from progressing.
Using transformative enabling technologies: This can be things like artificial intelligence, 3D printing, robotics and big data which are not being exploited fully by a company. Many in fact use none of these at all. This can be for a number of different reasons, but is often to do with company culture and/or a lack of funds to invest in such technologies (again this is where R&D Tax Credits offer a lifeline).
Skills gaps: A major barrier to innovation in manufacturing is when there’s a shortage of specific skills. Ireland has a young, highly skilled and dynamic workforce, but some areas of manufacturing are incredibly niche. Companies must recruit and retain essential staff to implement new concepts, strategies and ways of doing things, which can often mean a dramatic shift in culture is required.
Most claims we see with regard to manufacturing are for development rather than research, with eligible projects looking to develop or improve an existing product, device, material or process. The work involved usually seeks a technological advance by resolving areas of technological uncertainty, which is different to, say, the much more research-based pharmaceutical industry.
The good news is that eligibility requirements state that even if your technologists or engineers ultimately fail in the project, or it takes longer than expected, R&D Tax Credits may still be available. Design work and feasibility studies can also qualify as long as technological advancement was made.
Administered by the Irish Revenue, R&D Tax Credits are open to all companies in Ireland that are undergoing qualifying research and development activities either in the Republic or inside the European Economic Area. It currently offers a 25% tax credit for offsetting against a company’s Corporation Tax liability which is additional to a tax deduction of 12.5%. Effectively, companies engaging in eligible R&D can be refunded by the Revenue to the tune of €37.50 per €100 of R&D expenditure made, so R&D Tax Credits actually cut the cost by up to 37.5% in real terms.
R&D projects can also produce a cash refund. If a business is not required to make a payment of Corporation Tax either for this year or the year prior, it can receive the relief as a payment instead (made up of three equal instalments across a three-year cycle). Alternatively, the tax credit can be used against future tax liabilities if so desired.
Find out more on our R&D Tax Credits webpage.
We’ve found that many company owners wrongly believe that R&D tax relief is only for big multinationals or scientists in laboratories. However, most claimants taking advantage of the scheme in Ireland are small to medium sized organisation from across every sector of the economy. As long money has been spent on research and development in either a technological or scientific capacity then the work is highly likely to qualify, as long as the company is also:
Although your company’s own accountant will be familiar with your general tax situation, R&D tax relief specifically may well not be their specialism.
Here at Myriad Associates we only deal with clients looking to make an R&D tax relief claim. We’re proud of our fantastic track record and know all the legal requirements and best practice down to the letter. With a wealth of experience across both the Irish Republic and the UK, we can work alongside you and your accountant to give your R&D tax relief claim for the very best chance of success.
Speak to our helpful team today on + 353 1 566 2001, or feel free to leave us a message and we’ll call you back.