Discover more about R&D tax credit eligibility in Ireland

Companies claiming the tax credit for R&D eligible activities in Ireland from Revenue must meet some criteria. This is an explanation of what qualifies for the R&D tax credit in Ireland.

Companies that pay Corporation Tax in Ireland that do qualifying work in Ireland, the EEA or the UK can claim the research and development corporation tax credit as long as the expenditure doesn’t qualify for a tax deduction in another country.

Work that qualifies for the R&D tax credit

Will your application for the R&D tax credit succeed first time? There are some stringent government R&D criteria in Ireland, and your application will be rejected if you don’t meet them.

Work must be within the fields of science and technology – so research in arts and humanities won’t qualify.

Examples of work qualifying your company for an R&D tax credit include:

• developing new products
• developing new processes
• improving a product or process

A checklist for R&D corporation tax credits

Use this R&D eligibility checklist to get an idea of whether your innovation activity in science and technology qualifies for this valuable tax credit in Ireland.

• Is the company Irish-resident?
• Is the company subject to Irish Corporation tax?
• Is the company doing R&D work in Ireland, the UK or the wider EEA?
• Does the company own the IP and the results of the R&D project?
• Is the company financially responsible for the R&D work?

If you can answer yes to each of these questions, your company is eligible for the R&D tax credit.

Think about the activities associated with the expenditure you want to claim tax relief on.

• Do they involve systematic, investigative or experimental activities?
• Are they in the field of science or technology?
• Do they involve one, or more, of the following categories of R&D?
  • basic research
  • applied research
  • experimental development
• Are you seeking scientific or technological advancement?
• Do the activities involve the resolution of technological or scientific uncertainty?

If you can answer yes to these questions, your R&D work is likely to qualify for the tax credit.

Financial criteria for your R&D tax claim

Almost anything you spend on your R&D activity can count towards your tax credit claim. These are the categories of work qualifying for R&D expenditure in Ireland:

• capital expenditure
• cloud computing
• materials
• overheads
• royalty payments
• staff costs, including agency staff and subcontractors

All of these items listed are eligible R&D costs in Ireland, though there are limits and conditions to each of these that your tax credit advisor can help you to navigate.

Documentation for your application

Companies applying for the R&D tax credit must maintain:

• technical documentation outlining project objectives, uncertainties, and outcomes
• financial records showing how costs were allocated
• timesheets or employee allocation records
• subcontractor agreements, if applicable

The rules for different sizes of organisation

Both larger companies and SMEs (Small and medium enterprises) can benefit from the R&D tax credit in Ireland.

The tax credit is calculated differently for these two sizes of organisation:

• Micro or small organisation: fewer than 50 employees; annual turnover or balance sheet total of less than €10 million
• Medium or large organisation: more than 50 employees; annual turnover or balance sheet total of more than €10 million

Contact us to find out how much your R&D tax credit claim could be worth.

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Outsourcing R&D activity

If a company is claiming the tax credit for R&D activity that has been subcontracted, there are a few considerations.

The R&D activity must be carried out by the company making the claim. But, R&D tax relief is available if the company has paid a university or institute of higher education in Ireland, the EEA or the UK to do the research. And tax relief is also available if the company has paid another person to carry out the research.

In both these cases:

The company needs to incur at least the same level of expenditure on qualifying activity that it carries out itself.

AND

The relief is restricted to 15% of the expenditure incurred, or €100,000, whichever is greater.

The subcontractor is not allowed to make an R&D claim themselves for this work, so the contracting company needs to inform them in writing that it plans to claim the tax credit.

The claiming company must bear the financial risk and own the results of the R&D work.