There have been many enhancements to Ireland’s taxation offering over the last number of years but it is important for companies to remember the age-old reliable reliefs that are still available. Here we give a short overview of the research and development credit rules as they currently stand.
Gone are the days of having to compute a company’s R&D credit by reference to a base year. Qualifying research and development expenditure qualifies for a 25% tax credit. This is in addition to the corporation tax deduction of 12.5% that the expenditure also attracts.
The credit, once calculated, can shelter any corporation tax arising in the year in which the expenditure is incurred. Any unutilised credit also be claimed against the prior year corporation tax liability.
If the company still has any remaining credits which have not been used, a portion of these can be refunded to the company by way of a cash refund. The level of cash refund available is dependent on the company’s prior year corporation tax liabilities and Paye liabilities.
Companies should note that R&D work which is contracted out to a university or to an unconnected subcontractor can also qualify for the relief subject to certain restrictions. Likewise capital expenditure incurred on a building or structure used for qualifying R&D activities may qualify for relief where the activities are carried on in the building for a period of over 4 years and the R&D activity represents at least 35% of all activities carried on in the building.
It is important to note that claims for R&D must be made within 12 months from the end of the year in which the expenditure is incurred. Any expenditure financed by way of a grant received by the company should not be included as part of the claim.
Companies should continue to review the nature of their operations to see if R&D activity is being carried on. This should be completed on an annual basis as the time limits to submit claims are quite tight.
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