General Overview of Research and Development Tax Credit available in Ireland as of March 2012.
(1) It is available to Companies only.
(2) Activities that qualify – in addition to the generally assumed white coat brigade activities like pharmaceuticals – the following areas could qualify – software development / food production / engineering / health and agriculture / natural sciences.
(3) So what is an R & D activity that qualifies – to quote Revenue : must be systematic in a field of science or technology involving research and seeking to achieve a scientific or technological advancement and involving the resolution of a scientific or technical uncertainty. In particular activities aimed at producing new or improved materials / products / devices / process systems or services can qualify – e.g. designing and implementing a new waste management system / adapting or improving equipment added to a processing line that greatly improves and streamlines the process / developing a new product – all could qualify for relief.
(4) How Credit works – (a) in general excess of expenditure in any year over the base year (2003 as set) will attract an additional 25% tax credit i.e. over and above normal CT relief of 12.5% e.g. R & D spend 2010 €125,000 – base year 2003 was say €50,000 – relief of €75,000 x 25% now due = €15,000 (this is in excess of normal deduction anyway for 2010 of €125,000 x 12.5%. Of course if 2003 was NIL or company is relatively new all expenditure will qualify.
(5) No CT liability? – from 2009 a claim can be made for a cash refund where say trading losses were incurred – in this case the refund is spread over 3 years
(6) Budget 2012 amendment – a volume based approach has been implemented for €100,000 of expenditure i.e. first €100,000 of R & D expenditure in 2012 will qualify for the extra 25% relief irrespective of 2003 base year expenditure – only excess over this limit will need to refer to 2003 – this is a boost for SMEs where level of expenditure in any year may not exceed 2003 level and can result in extra €25,000 tax credit being available.
(7) What expenditure qualifies – it can be either Capital or Revenue i.e. on buildings / machinery / salaries / overheads etc. attributable to R & D.
(8) In house or sub contracted expenditure – if sub contractors used this area of claim cannot exceed 10% of in house expenditure – however under Budget 2012 this is recognised as a restriction on small companies lacking internal expertise and accordingly the greater of €100,000 or 10% now applies subject to the fact that such claim cannot exceed in house expenditure.
These are guidance notes and professional advice should be obtained before commencing any R & D project or making a claim to Revenue.
Contact Paul Farrell or Tony Mallon on 041 9836707 or firstname.lastname@example.org to enquire if you are elligible for this Credit.
Check out www.mcgrory.ie for information on this and other supports available to you.