Does My R&D Project Need to Succeed to Claim the Tax Credit?

Failed projects are a source of headaches for most, representing time and resources spent without any expected ROI. Fortunately, there is one spot where failure gives back: R&D tax credits.

The good news is, yes – you can still claim tax credits on failed R&D projects, and Revenue’s own guidance makes this clear.

Can I claim R&D tax credits if my project didn’t succeed?

Yes. Revenue’s Manual is explicit on this point:

“There is no requirement for the R&D work to be successful. The definition of qualifying R&D activity requires that a claimant company engage in systematic activity which seeks to achieve a scientific or technological advancement, and which involves the resolution of scientific or technological uncertainty.”

In other words, Revenue focuses on the attempt, not the outcome. If your project set out to resolve a genuine scientific or technological uncertainty and involved systematic experimentation, the work qualifies for R&D tax credits, even if you never reached a solution.

This is good news for innovative companies in sectors like engineering, life sciences, software, food technology, and advanced manufacturing, where experimentation and iteration are simply part of the process.

What does a “failed” R&D project mean?

In the context of R&D tax credits, a “failed” project simply means one where the sought-after scientific or technological advance wasn’t fully achieved. It doesn’t mean the work was low quality or poorly managed, or even that the project wasn’t taken forward in any context.

Failure in this sense can actually strengthen a claim. If your best engineers or scientists couldn’t crack it, that’s strong evidence that genuine uncertainty existed – exactly what Revenue wants to see.

Consider two examples:

• Company A (Software): A Dublin-based SaaS company attempted to build a machine learning model to predict real-time supply chain disruptions. After months of testing, the model couldn’t meet the required accuracy thresholds and the project was paused. The attempt to resolve a genuine technical uncertainty still qualifies.
• Company B (Manufacturing): A Limerick-based component manufacturer trialled a new composite alloy for lightweight structural parts. Despite a systematic testing programme, the material repeatedly failed stress tolerance tests and the project was shelved. The work involved experimental development seeking a technological advance which qualifies.

When wouldn’t a failed project qualify for R&D tax credits?

However, not all failed projects will qualify just because they failed. A project that was unsuccessful because of business challenges, like not having the right team, or not having the resources to carry out the project any longer, will not implicitly qualify. What’s important is that you were seeking an advance in science and technology and navigating uncertainty.

Similarly, commercial disappointments don’t create R&D claims; a new product that didn’t sell, or if you stopped a project because a competitor got there first aren’t failures that demonstrate an attempt at an advance in themselves. The reason you failed is less important than the work you were doing before the project was abandoned.

Revenue’s guidance is clear that the activity must meet all five conditions:

• It must be systematic, investigative or experimental in nature
• It must be in a field of science or technology
• It must involve basic research, applied research, or experimental development
• It must seek to achieve scientific or technological advancement
• It must involve the resolution of scientific or technological uncertainty

Why does Revenue still reward R&D projects that fail?

Failure is a natural part of innovation. If every experiment worked first time, there would be no uncertainty and therefore no R&D.

Ireland’s R&D tax credit scheme is designed to encourage companies to take technical risks, invest in innovation, and push the boundaries of what’s scientifically possible. Failed projects often make the clearest claims because they demonstrate:

• The uncertainty genuinely existed and couldn’t be easily resolved by a competent professional
• Knowledge in the field of science or technology was advanced, even if the company’s specific goal wasn’t met
• Real expenditure was incurred in trying to achieve an advance

The current credit rate is 30% of qualifying expenditure for accounting periods commencing on or after 1 January 2024, increasing to 35% for 2026 periods. That’s a meaningful return on investment even for a project that didn’t deliver the intended result.

What R&D costs can I claim for a failed project?

The qualifying costs are the same as for a successful project. As set out in Revenue’s guidance, eligible expenditure includes:

• Staff costs: salaries, bonuses, pension contributions, and PRSI contributions for employees directly involved in the R&D activity
• Materials consumed in testing, prototyping, or experimentation
• Subcontractor costs (where the work is carried out in the EEA or UK)
• Software licence costs used in the R&D process
• Overhead costs that are wholly and exclusively incurred in carrying out qualifying R&D activities

This applies across a wide range of activities, from early-stage prototype development and clinical or field trials, to process improvement testing and software development, even where none of that work ever reached production or market.

What records should I keep for a failed R&D project?

Documentation is critical in any claim, but particularly for a failed project where there’s no successful outcome to point to. Your record-keeping for R&D doesn’t need to be perfect, but it does need to demonstrate that you meet the requirements for tax credits.

Useful records include:

• Technical reports, lab notes, or developer logs describing the scientific or technological uncertainty and the steps taken to resolve it
• Test results, trial data, benchmarking outputs, or simulation results showing the iterative nature of the work
• Project plans, sprint boards, or R&D meeting notes
• Timesheets or time allocation records showing which staff worked on qualifying activities and for how long
• Cost breakdowns: invoices, payroll records, and materials expenditure relating to the project

One of our clients, a medtech company in Galway, had shelved a project to develop a novel biosensor after 18 months of testing. With proper documentation of their technical uncertainty, testing programme, and staff time allocation, they were able to claim successfully, recovering a meaningful credit on expenditure they’d already written off.

Key takeaways

• Revenue’s guidance is clear: there is no requirement for R&D work to be successful to qualify for the credit
• To qualify, you must attempt to achieve scientific or technological advancement and the resolution of uncertainty
• Failed projects can qualify for the same costs as successful ones: staff, materials, subcontractors, software, and overheads
• The current credit rate is 30% of qualifying expenditure (for accounting periods commencing on or after 1 January 2024, increasing to 35%)
• Strong documentation is essential when there’s no successful product to demonstrate the work

Whether your project produced a breakthrough or hit a dead end, the costs you incurred in genuine R&D work may still be recoverable. If you’d like us to review your eligibility, our team is happy to help you assess your claim. Get in touch today.