Dáil Éireann Debate, Wednesday - 13 July 2022
158. Deputy Ged Nash asked the Minister for Finance the estimated savings that would be made by ending the refundable element of the research and development tax credit from 1 January 2023; and if he will make a statement on the matter. [38663/22]
View answerThe Research & Development (R&D) Tax Credit provides a 25% tax credit for qualifying R&D expenditure. In the first instance, the credit reduces the CT liability of the company for the accounting period in which the relevant R&D expenditure is incurred. Any excess credit can be carried back to the preceding accounting period. Following this, any remaining excess credit can be carried forward indefinitely for use against future CT liabilities, or can be claimed as a repayable credit.
The company may apply for a refundable credit in three instalments, over 33 months. The first instalment to be paid will amount to 33% of the excess amount. The remaining balance of the excess amount will then be carried forward and used to reduce the company’s Corporation Tax liability of the next accounting period and then, if any of the excess amount still remains, a second instalment amounting to 50% of that remaining balance will become payable. Any remaining credit is again carried forward for offset against the company’s Corporation Tax liability of the following accounting period, and if any part of the excess R&D credit still remains, that amount will become payable not earlier than 24 months after the corporation tax pay and file date for the accounting period in which the R&D expenditure was incurred.
I am advised by Revenue that It is not possible to estimate the yield from ending the repayable element of the R&D tax credit, as information in respect of the future payments of the credit, which is dependent on the future profitability of claimant companies and on their level of qualifying R&D activity, is not known in advance.
Furthermore, as excess credit can be carried forward indefinitely for offset against future corporation tax liabilities, the elimination of the refundable element of the credit would in theory be largely a timing issue and not a net saving to the Exchequer. However it should be noted that behavioural changes could be expected from businesses if such a change were to be made, given the important role that the credit plays in incentivising and supporting innovative research in Ireland.
The Deputy may wish to note that information on the cost of the R&D tax credit for recent years is available on the Revenue website at the following link, and this includes a breakdown of the credit cost each year between offsets and repayable credits:
www.revenue.ie/en/corporate/documents/statistics/tax-expenditures/r-and-d-tax-credit-statistics.pdf.
