Are you aware of the relief for Tax Credits for Research and Development?

Tax credits are available for research and development expenditure.  The relief was introduced to incentivise large multinationals to relocate their R&D departments here but it applies to all enterprises carrying on R&D activities.  The expenditure must be incurred in the area of technology and science and involve research and development activities.  It must seek to achieve technological or scientific advancement or solutions to technological or scientific uncertainties.  

The tax relief is calculated by allowing a tax credit of 25% of the qualifying expenditure against the corporation tax liability of the company.  The relief is in addition to the normal deduction for expenditure incurred against taxable income.  The tax credit is potentially refundable – eventually!

The tax credit is used as follows:

  1. First, the credit is set against the corporation tax liability for the current period
  2. Any excess is then offset against the corporation tax liability for the prior accounting period (of corresponding length), which should give rise to a refund of corporation tax already paid for that period.
  3. Any remaining credit is then carried forward.  One third of the carry forward will be refunded after the due date for filing the corporation tax return for the period in which the R&D claim arose.
  4. The remaining excess can be carried forward against future periods with any unused amount being potentially refundable.*  
  5. The company can surrender all or part of its R&D credit to employees engaged in R&D activities.*  The amount surrendered to an employee can be used by the employee to reduce his income tax liability.*.

To claim the credit the company must carry out qualifying R&D activities within the State, must engage in R&D activities in the period and keep a record of all expenditure incurred.  The expenditure must be incurred in the State or an EEA county where it does not qualify for relief in that country.

Note the following:

  1. A company is entitled to claim relief for R&D undertaken by:
    1.  a university (in the EEA);*
    2. An unconnected third party – provided third party does not claim the relief;*
    3. A company is entitled to claim relief for expenditure incurred prior to the commencement of the company to trade.*
    4. Relief is not available for any expenditure covered by grants

Please contact Imelda Prendergast – Director: OSK Corporate Ltd on 01 439 4206 for more details. OSK tax advisors Dublin provide tax planning services that maximise the benefit to businesses and individuals while enabling total compliance with all relevant tax laws.

*certain conditions and limits apply.

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