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Has your company innovated recently? An R&D Tax Credits claim could drastically reduce the costs.
If your company is based in Ireland and has carried out innovative activities recently then it may well be eligible for highly valuable research and development (R&D) Tax Credits. Any company in any industry can apply (not just large science and tech outfits!) and it doesn’t matter about the size of the company or the project. The important thing is that qualifying activities were carried out and a scientific and/or technological uncertainty was addressed.
The international indicator that measures R&D rates in a particular country is the “gross domestic expenditure on R&D” (GERD). This is shown as a percentage of GDP.
GERD includes all R&D expenditure by all organisations, including companies, non-profit organisations, academic institutes, governments and companies. The latest (2017) figures for Ireland show GERD sits at around 1.05% of GDP, although clearly the economic effects of COVID-19 will have had an effect since.
In order to keep Ireland competitive on the world stage and to help the economy recover in a post-pandemic world, innovation, export and growth are vital.
The scheme was actually launched back in the early 2000s, but too many businesses are still not receiving the support they’re entitled to. This is for a number of reasons; some companies don’t know it exists or wrongly assume they’re not eligible. Others are put off by what can be a very complex application process, or are worried about the time and resource involved (we’ll look at how Myriad Associates can help with this in a minute).
Irish companies can claim for eligible research and development activities in Ireland or inside the European Economic Area. Administered by Revenue, relevant R&D spend will generate a 25% tax credit (in addition to the standard 12.5% rate) which can be offset against a company’s Corporation Tax bill. Therefore, in effect €37.50 for every €100 of R&D costs can be claimed back - extremely generous indeed - and if the company made a loss it can receive the benefit as a cash payment instead.
R&D Tax Credit claims need to be made within 1 year from the end of the accounting period in which the R&D expenditure occurred. Refunds are limited to the greater of either the payroll liabilities for the period in which the relevant R&D expenditure is undertaken, or the Corporation Tax owed by the company in the preceding 10 years. Loss-making companies also have the option of carrying forward their refund for a future year when they do owe Corporation Tax.
The absolutely essential factor in making a claim is whether technological or scientific research has been undertaken, and costs incurred because of it. So, there must be challenges and uncertainties being addressed that experts in the field aren’t easily able to work through.
Revenue guidance also states that to be eligible for R&D Tax Credits companies must:
Claiming R&D Tax Credits is unfortunately not as easy as simply filling out a form, submitting some expenses and that’s it job done. It’s far more complex than that, and Revenue are very specific about how guidance should be followed.
Essentially, every claim submitted must be fully substantiated and meet all the qualifying conditions. There are strict criteria around how staff time and resources are allocated, how material and overheads related to R&D work should be apportioned and what the eligible processes are. Specific records also need to be included, for example in demonstrating when key stages occurred. Can you prove when and how prototypes were developed, for instance? Which individuals (internal and external) had an input, and what roadblocks were there?
The biggest costs in a claim are usually salaries, overtime and contractor fees. Overheads, material costs and capital expenditure (for example land or buildings, or plant and machinery) can also be included.
Yes, the process of applying for R&D Tax Credits isn’t much fun. But the Myriad Associates team of expert R&D funding specialists, accountants and consultants can work with you in compiling and submitting a claim that’s Revenue watertight.
As part of our process, Myriad Associates will collaborate with key individuals in your company that played a role in the R&D activities. We will therefore not only work to understand your business, your goals and your challenges from the outset, we’ll also know where the eligible project costs are ‘hiding’. This all saves you time and hassle, and of course means you can rest easy knowing R&D tax specialists are on your side. Plus, no costs will be missed off so you’ll received everything you’re owed to the last penny.
Once all the figures have been put together (and of course this is part of our service too) a detailed final technical report will follow. This will also prove essential if Revenue do raise any questions (and yes we work on those for you too).
Don’t forget - Revenue can audit any claims for R&D Tax Credits up to four years later, even if the benefit has long been paid out. This makes it all the more critical to get it right first time.
As you’ve now probably recognised, creating an R&D Tax Credits scheme is a complex and multi-faceted task. There’s quite a paper trail and a fair amount of work involved - do you really have the time, knowledge and resource to do it yourself?
Thousands of euros could well end up coming your way - don’t delay!