How to claim R&D Tax Credits in Ireland

Around 2,600 companies in Ireland benefitted from R&D Tax Credits in 2019 alone, totalling over €650m, according to latest OECD statistics. And with up to 25% of qualifying R&D expenditure being offered back by Revenue, in addition to the 12.5% standard rate, as much as 37.5% can actually be claimed in respect of eligible R&D costs.

Open to all Ireland-based companies regardless of size or sector, many will then plough the resultant cash back into innovative work. And there begins a lucrative cycle of innovation and R&D Tax Credits.

What are R&D Tax Credits?

R&D Tax Credits were launched by Revenue back in 2004. It’s primarily a way of incentivising Irish companies to invest in innovation across a wide range of sectors, from software and pharmaceuticals to manufacturing and construction.

We’re not just talking science labs and big tech here (although these areas are obviously big claimers). Any company in Ireland that has made some kind of scientific or technological advancement can claim.

How are R&D Tax Credits received?

Funding is provided in the form of tax credits which can either be used to reduce your Corporation Tax bill for the current accounting period or, if insufficient Corporation Tax liability exists, can be carried forward indefinitely.

The R&D scheme also allows for expenditure on relevant R&D activities that occurred even when the company was pre-trading. Where this is the case, R&D Tax Credits claim can be submitted within one year after the end of the accounting period in which the company first begins to trade.

It’s also worth noting that companies claiming R&D Tax Credits can, in some circumstances, opt to reward selected employees via an alternative use of that credit. So effectively the company is therefore surrendering a percentage of their R&D credit (which otherwise would have been used to cut their Corporation Tax bill) to ‘key employees’. This is turn reduces their effective rate of tax to 23% (instead of over 40% on average without the R&D Tax Credit).

In order to qualify as a ‘key employee’, the employee must carry out at least 50% of their duties on eligible R&D activities as part of their employment. This needs to be apportioned correctly with up-to-date evidence.

How does my company qualify for R&D Tax Credits?

Yes the R&D Tax Credits scheme is incredibly generous. But understanding exactly which of your project costs actually qualify is a minefield. That’s because legislation and guidance set by Revenue can change regularly, and every R&D project is unique. So even if your company has claimed several times before and been successful, there are certainly no guarantees. This is why many companies in Ireland opt to partner with an R&D tax and funding specialist like Myriad Associates. That’s because not only will be check your eligibility from the outset before building your claim for you, you also stand the best chance of avoiding a Revenue audit.

However - broadly speaking - to quality for R&D Tax Credits in Ireland, your company must:

• Be subject to corporation tax in Ireland
• Carry out qualifying R&D activities in Ireland or the European Economic Area (EEA)
• Ensure that the R&D expenditure does not qualify for a tax deduction in another country

What activities are eligible for R&D Tax Credits?

Whilst a broad spectrum of R&D activities will attract an R&D Tax Credits claim, not all of them will. Again, this is what makes partnering with an R&D tax specialist a smart move.

Each element of research and development projects that are included in the claim must meet a number of conditions. It must:

• Involve systemic, investigative or experimental activities
• Be in the field of science or technology
• Involve one or more of - basic research, applied research or experimental development
• Seek to make scientific or technological advancement
• Involve the resolution of scientific or technological uncertainty

However, companies claiming R&D Tax Credits are not required to hold the intellectual property rights resulting from the R&D work. There is also no requirement for the R&D work to be successful.

You can read up on Revenue’s R&D Tax Credit guidelines which break down each of the above definitions to avoid misinterpretation.

How do I make a claim for R&D Tax Credits in Ireland?

It is possible to make a claim yourself online using the Revenue Online Services (ROS). However, the problem is your chances of success - purely due to the complexity of applying - are vastly reduced compared to partnering with experts. Not only that, but Revenue is within its rights to carry out spot checks, for any reason. These checks can be undertaken on claimed R&D projects for up to five years and the credit has been issued, so it's important to keep documentation to avoid unnecessary and unwanted clawbacks.

When you come to us with your R&D Tax Credits claim, the first thing we’ll do is sit down and go through your project thoroughly to check eligibility. This saves time and effort from the outset - after all there’s no point in putting together a claim that’s doomed to fail.

Next our expert team will build the claim on your behalf, including all the data and figures available. Although it’s not essential from a legal point of view, we strongly recommend including an R&D claim report to justify the technical advancement made. It should also outline what technical/scientific challenges and uncertainties were tackled, alongside details of the eligible costs on a project-by-project basis.

Get in touch with our team

“Myriad is professional, helpful, knowledgeable and friendly. I would definitely recommend Myriad to anyone who thinks they might have an R&D claim. It's great value for money. So it's a no-brainer for me really” - Caroline Reid, Storage Made Easy (Vehera Ltd)

To ensure your claim is maximised, successful (and you keep more of it), why not contact Myriad Associates to discuss your R&D project in more detail?

Call us on +353 1 566 2001. Alternatively drop us a message and we’ll call you back.