Businesses based in Ireland, the EEA and the UK, that pay corporation tax to the Irish Government can take advantage of financial support for research and development.
This takes the form of a programme known as the Irish R&D tax credit. The credit is a refund of 30% of a business’s eligible R&D costs (or 35% for accounting periods starting after 1 January 2026), which is a significant advantage.
But what is the Irish research and development tax credit programme? And how can you get access to this valuable benefit that allows you to recoup part of your R&D expenditure?
Overview of research and development tax credits in Ireland
The Irish R&D tax credit is essentially a benefit applied to costs associated with scientific or technological research and development work.
A tax credit is applied to a company’s tax bill and treated as an overpayment – so claiming the R&D tax credit will reduce how much tax your organisation has to pay. This frees up capital for further innovation or growth, potentially giving companies that pay tax in Ireland an edge over their competitors.
Revenue Ireland pays the R&D tax credit refund in three annual instalments. Learn more about how the tax credit works from Revenue Ireland’s website.
The aim of Revenue’s R&D tax credit is to promote research and development activity among Irish businesses. Governments worldwide are keen to encourage research and development work because innovation creates a thriving business ecosystem which stimulates the country’s economy. Reimbursement of R&D expenditure is a tactic used by many governments to achieve this aim. In Ireland, the reimbursement takes the form of a tax credit.
Qualifying R&D activities under Irish legislation
Only certain types of work are eligible for the R&D tax credit.
R&D activity, for the purposes of the tax credit, is defined under Irish legislation as work that removes that uncertainty through systematic investigation or experimentation.
We can advise if you are not sure whether your work qualifies for the R&D tax credit.
Work to resolve uncertainty about commercial viability would not be eligible for tax credit as it is not a technological or scientific uncertainty. However, an R&D project that resolves a scientific or technological uncertainty to achieve a cost target would qualify.
To qualify for the R&D tax credit, your company needs to pay taxes to the Government of Ireland. It also has to be carrying out the R&D activities in Ireland, the wider EEA or the UK.
Also, if your company has benefited from a tax deduction in another country, it will not qualify for the R&D tax credit.
Before you apply for the Irish R&D tax credit, make sure that the research work that you wish to claim for:
- involves systematic, investigative or experimental activities
- is in the field of science or technology
- involves one, or more, of the following categories of R&D: basic research; applied research or experimental development
Another qualification for the R&D tax credit is that the work should:
- seek to make scientific or technological advancement
AND
- involve the resolution of scientific or technological uncertainty.
Work that seeks technological or scientific advancement
To ensure the success of your R&D tax credit application, your company’s expenditure must be related to work that advances overall knowledge and capability in the field of science and technology. It can’t just advance a company’s own knowledge and capability.
You can claim the tax credit for work that seeks knowledge that is not readily available because it hasn’t been published, or it’s not in the public domain. Two companies that are independently seeking the same knowledge independently can both claim.
Work that aims to resolve scientific or technological uncertainty in Ireland
A scientific or technological uncertainty arises when:
- There is uncertainty as to whether a goal can be achieved
- There is uncertainty about which of a number of methods is most suitable
Success or failure – it doesn’t matter
It is important to note that to be eligible for the R&D tax credit, the work must seek to achieve scientific or technical advancement. But it does not have to succeed in achieving it. For example, your business may have stopped an R&D project because another team working in the same field publishes their results in a journal. But you can still apply for the tax credit based on this work. As long as you can show that your company’s R&D work is systematic, investigative or experimental and that you have undertaken it to resolve a clearly defined scientific or technological uncertainty.
Revenue’s fields of science and technology
The categories that qualify for the R&D tax credit relief are:
- agricultural sciences
- engineering and technology
- medical sciences
- natural sciences
Eligible R&D costs in Ireland
Eligible costs for the R and D tax credit consist of expenditure incurred in the carrying on of research by the company. By claiming your full entitlement of R&D tax credits under Section 766C, you could gain back €30 for every €100 spent on research and development activities.
Examples of such costs might include: rental of a specialised laboratory; materials; and staffing costs, including payments to subcontractors.
Indirect overheads (such as recruitment fees, entertainment, insurance and travel) are not eligible for an R&D tax credit claim in Ireland.
Although companies must make their R&D tax credit claim within a strict 12-month period, some costs will be carried forward from previous accounting periods. These need to be reported in a specific way – but an R&D tax consultant can advise you of the correct process for reporting costs carried over.
With our extensive experience in R&D tax consultancy in Ireland, we are well positioned to advise on which costs you should include in your R&D tax credit claim. We can quickly identify costs that you may otherwise miss in your CT1 R&D tax credit claim form. We will also ensure that your qualifying expenditure on R&D are appropriately broken down according to Revenue’s preferred format.
How claims are processed by Revenue
When processing R&D tax credit claims, Revenue applies two tests – the science test and the accounting test.
The science test asks: Are the activities consistent with the statutory definition of research and development activities?
The accounting test asks: Was the expenditure being claimed laid out on R&D activities?
Revenue may ask to see documentation supporting your claim. It is important that your research work is supported by contemporaneous and relevant documentation. If your company can’t show such documentation, your claim may be disallowed.
How NX Advisory supports claims
With our 10-year track record of international R&D tax experience, we are passionate about providing R&D tax credit help to companies. With our support, companies include all the costs eligible for the R&D tax credit in their claim. For support with better understanding what costs count, contact us.
As experienced tax consultants, we can assist you in gathering the required information, and we can ensure that your claim for the R&D tax credit is correctly filled in and meets Revenue’s strict filing deadline.
Common mistakes Irish firms make when claiming R&D tax credits
According to Ireland Revenue these are the common mistakes that companies make when completing their Form CT1 to claim for the R&D tax credit in Ireland:
Failure to submit a correct claim within the 12-month deadline
Revenue is unforgiving where the 12-month deadline for submitting is concerned. Companies filing for the first time, or after a three-year break, must also fill in a pre-filing notification form at least 90 days before filing.
Entering claims for carried forward amounts in the wrong section
It is important to use the correct panels on the CT1 form when reporting carried forward amounts.
Failure to provide a breakdown of total qualifying expenditure
The qualifying expenditure is broken down into machinery or plant; emoluments of employees; and remaining expenditure on form CT1.
Errors in treatment of credit
The amount of credit that can be claimed increases to 35% after 1 January 2025. Before that, it was 30%. It is important to apply the appropriate credit for the tax period for which you are claiming.
Failure to give details of grants received
Expenditure that is met by grants awarded by the Irish state, or an EEA state, or the UK, doesn’t qualify for relief. So it is important to correctly report such grants when claiming for the R&D tax credit.
Failure to complete subcontractor costs on the main panel
Companies need to correctly report their subcontractor costs, and also inform their subcontractor that they are claiming for the tax credit.
Failing to hit the calculate button to ensure the entries flow through
Some of the information you provide will have a calculation applied as you fill in the form. As experienced tax consultants, we have processes in place to ensure that your tax credit application is filed accurately and on time.
Categories of research that are excluded from the R&D tax credit
The guidance for the research and development tax relief includes a list of activities that are specifically excluded from the scheme. These are:
- research in social sciences (economics, business management, and behavioural sciences), arts, or humanities
- routine testing and analysis for quality or quantity control
- cosmetic or stylistic changes to products, services or processes
- operational research such as management studies or efficiency surveys
- corrective action for breakdowns during commercial production
- legal and administrative work on patents
- construction of facilities and equipment that will not be used exclusively for R&D
- market research, market testing, market development, sales promotion or consumer surveys;
- prospecting for minerals, petroleum or natural gas
- work to market, commercially produce or distribute a new or improved material, product, device, process, system or service
- admin and support services (such as transportation, storage, cleaning, repair, maintenance and security) not exclusively connected with a research and development activity
If you are not sure whether an activity you intend to claim for is eligible, we can make recommendations to ensure your claim is reasonable and correct.
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