Tax Measures to Incentivise R&D

23 Oct 2019

A R&D Tax Credit is an additional tax allowance equalling 25% of the relevant R&D costs of a company, explains, Robert Johnson, ifac’s Senior Tax Consultant.

An R&D tax credit is a great way to recover part of the investment in qualifying R&D activities as it offsets some of the corporation tax for the accounting period when it was incurred.

A qualifying R&D activity involves each of the following:

1. Systematic, investigative or experimental activity

2. Within an approved field of science or technology

3. Being one or more of the following; Basic research i.e. theoretical; Applied research; Experimental development

4. Resolution of scientific or technological uncertainty

5. Achieve scientific or technological advancement

Eligible R&D expenditure, based on Revenue’s current interpretation is as follows:

• Salary and all other employment benefits - This must be time apportioned, so timesheets are essential if this cost is to be claimed. Canteen or HR costs cannot be included.

• Plant and Machinery – What percentage of use contributes to R&D activity?

• Raw Materials/Consumables - What percentage of use contributes to R&D activity?

• Subcontracted R&D – You can only claim up to 15% (or max €100,000) of a company’s total R&D spend on outsourcing provided by a third party or up to 5% (or max €100,000) if that third party is a third level institution.

• R&D buildings

• Power consumed in R&D activities

Maximise Knowledge Development Box Reliefs

The Knowledge Development Box reduces tax on profits earned by qualifying Intellectual Property (IP) income to a reduced tax rate of 6.25% instead of 12.5%.

1. The IP income which qualifies is income which is derived from:

2. Qualifying patents

3. Copyrighted software Protective certificates for medical products and

4. Protective certificates for Plant and Machinery

A qualifying patent must have a substantive examination for novelty and inventiveness undertaken otherwise the Knowledge Development Box will not apply. European patents and other international patent offices are permitted once they provide substantive examination. A qualifying patent must be as a result of R&D activity undertaken by the company. IP for SMEs derived from processes etc. which are patentable but not yet patented, will qualify if they have been certified as ‘novel, non-obvious and useful’.

Note: Marketing related IP does not qualify (i.e. brands, trademarks and image rights)

For further information please contact:

David Leydon, Head of Food & AgriBusiness

087 990 8227

Contact our team today

We know that when you're in the thick of it it's not always easy to see where you are, how change might affect you, or where you need to go. Contact our team today.

Get In Touch

Join Our Newsletter

Sign up to our newsletter full of tips and updates on topical issues throughout the year.