What Projects Qualify For R&D Tax Credits In The Medical Industry?

The Medical industry is one of the biggest areas of research and development activity in the world. The R&D tax credits scheme offers companies conducting research and development credit of 25% of qualifying expenditure, reducing a company’s corporation tax. Despite this, many companies in the sector are still yet to claim R&D tax credits.

However, since the introduction of the R&D tax credits scheme in Ireland, there has been a 25% increase between 2014/15 and 2016/17 in the total amount of R&D tax credits claimed by pharmaceutical companies, and these encouraging figures are set to rise.

How do I know if I qualify for R&D tax credits?

To qualify for R&D tax credits, your company must have a project which, through ‘basic research’, ‘applied research’ or ‘experimental development’, has sought a technological or scientific advancement in its industry, navigating a degree of difficulty within the European Economic Area. Tax credits apply to products, processes, materials, devices and services, so there is plenty in the medical industry which qualifies for R&D tax credits.

How does this apply to the medical industry?

Revenue recognises many areas of the medical field as part of Medical Sciences. Pharmacology, as part of ‘basic medicine’, is one of the clearest examples. Although Revenue states that there is little ‘basic research’ conducted by Irish companies, this in no way limits the scope of eligible R&D activity in the pharmaceutical industry.

• Drug discovery is one of the largest aspects of the pharmaceutical industry where R&D tax credits are claimed. The development of a drug or treatment and its chemical research and further testing is a prime example of R&D in the pharmaceutical industry. This is normally carried out by research companies, universities or large pharma companies. Our experience with this suggests that most of the qualifying activity for Pharmaceutical R&D tax credits occurs in the clinical trials of Phase 1-3.

• Devices in the medical field often show evidence of R&D. This includes devices for administering drugs or monitoring patients.
• Testing Methods that are being developed, or Design of Experiments are equally eligible for R&D tax credits. Although there is a presumption that R&D tax credits only apply to the final product and not to its manufacturing process, the production and associated activity very much qualify. By using technology to improve efficiency or efficacy of a testing method, a company can be entitled to R&D tax credits. 
• Development and improvement of products, processes or services are often forgotten as aspects of R&D but can yield great results. For example, companies that seek to make a process more efficient, effective or to improve the results of an existing product may qualify for pharmaceutical R&D tax credits. This includes improvements like sterility, speed of process or fitness for market (i.e. a sugar-free drug).

In Summary:

There is plenty of activity in the Irish pharmaceutical and medical industries which qualify for R&D tax credits, from the creation of a new drug to the packaging. Adapting and improving the product or process to be more efficient, cost-effective, sustainable or to yield greater results can all help your company make a claim for R&D tax credits. Although the process may seem daunting, there are plenty of options for help, from your accountant to dedicated experts who identify activity on which you can claim, saving you time and effort. Find out today if you could qualify by emailing us, and we’ll let you know.