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Partnering with a university on R&D? Irish companies can claim up to 30% back on qualifying costs – with a cap. Here's what Revenue allows and how to do it right.
Ireland's R&D tax credit offers qualifying companies a 30% credit on their eligible research and development expenditure; however, one cost category that can flummox claimants is university payments. Can you claim for work contracted to a university or institute of higher education?
The short answer is yes. But the rules around how much qualifies, what notifications are required, and how records must be kept are specific enough that it is worth understanding them properly before filing.
Yes, and Revenue's guidance is explicit on this point. The R&D tax credit does not require all qualifying work to be performed in-house. A company that pays a university or institute of higher education to carry out R&D can include those payments as part of its qualifying expenditure.
Two points worth noting up front. First, you don’t need to own the resulting intellectual property for a claim to succeed. Second, the R&D doesn’t need to produce a commercially usable outcome. What Revenue looks for is that the work aiming to advance science or technology. Whether it succeeded is a separate matter.
That said, there are caps on the amount of university costs that can be included, and conditions attached to claiming them.
A company with qualifying R&D expenditure can pay a university or institute of higher education to carry out R&D on its behalf and then can include those university costs in its claim, up to a cap. The cap is the greater of:
This cap applies cumulatively to all university subcontractors; if you contract multiple universities to carry out work, you should be mindful of the cap applying across the board.
There is also a condition: the company must be carrying out its own qualifying R&D. It isn’t possible to outsource an entire R&D programme to a university and claim the credit on those payments alone. The university costs are only deductible where the company has its own eligible expenditure in the same period.
One further distinction matters here. The outsourced activity should constitute qualifying R&D of the claiming company, not simply research the university happens to be conducting. In other words, the university must be working on a defined project for the company, directed at resolving the company's scientific or technological uncertainty.
Here is what that looks like in practice:
Company A spends €600,000 on qualifying R&D activities carried out in-house during its accounting period. It also commissions a university to conduct related research on its behalf, at a cost of €150,000.
The cap on qualifying university costs is the greater of 15% × €600,000 = €90,000, or €100,000. The cap is therefore €100,000.
Since the university payment of €150,000 exceeds this, only €100,000 can be included in Company A's qualifying expenditure.
Total qualifying expenditure: €700,000. R&D tax credit at 30%: €210,000.
Had the university payment been €80,000 rather than €150,000, it would fall below the €100,000 floor and the full amount would qualify.
The €100,000 floor is genuinely useful for smaller spenders. A company with €200,000 of its own qualifying R&D would face a 15% cap of just €30,000, but can still include up to €100,000 of university costs if the payments support it.
Revenue's rules apply to universities, colleges, institutes of technology, and professional schools. The defining characteristic is post-secondary education. The activity must be carried out in a relevant EEA Member State or the United Kingdom.
Revenue applies the university subcontracting rules and the unconnected subcontractor rules separately, with each cost category having its own cap. A company engaging both a university and a third-party company in the same period can claim under both limits without one reducing the other.
However, there is one restriction on all third-party contracting: a company cannot subcontract qualifying R&D to a connected person and include those costs under the subcontracting rules.
Yes, and this is a requirement that is easy to miss.
The claimant must notify the university in writing, before or on the date of payment, that the university is not entitled to also claim the R&D tax credit for the same activity. The purpose of this requirement is to prevent both parties claiming the credit on the same expenditure.
If you haven’t sent written notification by the time payment is made, the university costs cannot be included in the claim. That is an avoidable outcome, and the notification should be built into the standard contracting process rather than left as a claim deadline formality.
The exception is where the institution can’t claim the R&D tax credit itself, for example a foreign university with no branch or presence in Ireland. In that case, the notification requirement does not apply.
As with any R&D tax credit claim, you must satisfy both the Science Test and the Accounting Test. This documentation does not go in with your CT1, but Revenue can request it after filing, and it must be ready.
Of course, your Science Test records should be comprehensive for the entirety of the work you did in the period. However, you should also have clear documentation pertaining to the university subcontracting (and any other subcontracting).
Your records should cover: a description of the R&D activities carried out by the university on your behalf; the field of science or technology involved; what scientific or technological advancement was being sought; what uncertainty the work was directed at resolving; and evidence that the answer was not already publicly available or readily deducible by a competent professional in the field.
It’s good practice to keep financial records across the board, not just for your R&D tax claim. Revenue may request evidence of any single cost or any apportionment method applied. Robust records serve a practical purpose beyond compliance. They make the claim easier to defend if Revenue raises a query, and they give your advisers the material to identify the full scope of what qualifies.
For university costs specifically, you will need: the amounts paid and the dates of payment; a description of the R&D activity the university carried out on your behalf; copies of contracts, project briefs, or task specifications; and the relevant invoices. The documentation should make clear that the activity constitutes qualifying R&D of your company, carried out on your behalf, rather than research the university was independently conducting. You should also have evidence of the written notification given to the university.
If the R&D project received grant aid from the State, the IDA, Enterprise Ireland, Horizon Europe, or a similar body, that grant amount must be deducted from qualifying expenditure before the credit is calculated. You can’t claim the credit on expenditure that has already been subsidised by public funding. This applies regardless of whether the grant was paid to the company or directly to the university.
University research partnerships can significantly extend the scope of a qualifying R&D claim, particularly for companies whose internal capability is supported by academic expertise. You can navigate the rules when you know them; the risks lie in the procedural requirements that can easily be overlooked.
If you would like Myriad's team to review whether your university partnership qualifies, get in touch with us to discuss your specific situation.
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Please contact us to discuss how working with Myriad can maximise and secure R&D funding opportunities for your business.
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