Research & Development Credit

The Finance Bill introduces a number of measures which will be attractive to Irish small and medium sized enterprises carrying on R&D activities.

The first measure is the relaxation of the incremental nature of the system of Corporation Tax credit for R&D expenditure by introducing a provision that allows the first €100,000 of qualifying R&D expenditure each year to qualify for the credit, regardless of the level of R&D spend in the main ‘base year’ which is 2003. This change is worth €25,000 in annual tax savings to effected companies.

The second measure is the introduction of an entirely new regime of allocation of company R&D credits to employees. Broadly, where a company has qualifying R&D expenditure it can ‘surrender’ part or all of its R&D credit to employees engaged in R&D activities. Any amount surrendered to an employee can be used by the employee to reduce his Income Tax liability, subject to certain limits.

It is widely accepted that the current R&D credit regime is underutilised by small and medium business, due to mistaken perception that the regime only applies to hi-tech R&D carried out by large domestic and multinational companies. In fact the regime has much broader application and may deliver real tax savings to any company which incurs expenditure on research, testing, design or improvement of processes, etc.

Please contact Imelda Prendergast - Partner OSK Small Business Support for further information.

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