R&D tax credits are a corporation tax relief that can reduce a company’s liability or, if a company does not have such a liability, it may be able to claim cash as a payable credit.
The R&D tax credit is calculated as 25% of qualifying expenditure incurred in the carrying on of qualifying R&D activities such as wages & salaries, material costs, outsourced costs, direct overheads and plant & machinery.
In the Budget 2020 it was announced that the R&D tax credit would increase to 30% for micro and small companies, subject to State Aid approval.
The credit can be set against the corporation tax liability in the accounting period of the claim and in the previous accounting period. If there is no such liability, then the company can claim a payable credit which is paid in three near equal annual instalments broadly up to the amount of:
Any excess credits are carried forward for set off against a future corporation tax liability.
Companies are also required to keep ongoing records of R&D costs and activities to be able to make a claim.
R&D must be systematic, investigative or experimental, in a specified field of science or technology.
Activities are qualifying where they:
Qualifying R&D can involve the development of new or improved products, processes, services, materials, or devices. R&D does not have to be successful to qualify.
Our approach to preparing claims has resulted in a strong record with claims being accepted by Revenue. We prepare claims as follows:
Unlike some other advisers, we prepare a full report at the time a claim is made even though Revenue do not require a report to be submitted at this stage. However, they are likely to ask for a report within the four year window for raising an audit. This approach has significant benefits because it makes a good impression with Revenue to submit a report in a timely manner, and it can also be very difficult to prepare a report two or three years after the event. The report aims to answer the 24 point questionnaire that Revenue issue when raising an aspect query.
We have recently prepared the following claims which have been accepted by Revenue Commissioners: