Dáil Éireann Debate, Tuesday - 21 May 2024
105. Deputy Rose Conway-Walsh asked the Minister for Finance the value and number of successful claims under the research and development tax credit made by SMEs and non-SMEs, respectively, in each of the years 2021, 2022 and 2023; if his Department will consider introducing a simplified application process for SMEs to encourage research and innovation among indigenous companies; and if he will make a statement on the matter. [22793/24]
View answerThe Exchequer costs of Research and Development (R&D) tax credit claims for accounting periods ending in 2020, 2021 and 2022 respectively are €658 million, €753 million and €1.148 billion. I am advised by Revenue that the figure for claims in respect of 2022 is a provisional figure as additional processing is required in relation to specified returns associated with 2022 claims, and a more detailed breakdown is expected to be available later this summer. Data in respect of claims for the year 2023 will be available next year.
For the Deputy’s information, Revenue’s statistical information in respect of the Research & Development (R&D) credit, for all years up to 2021, is available at the following link: www.revenue.ie/en/corporate/information-about-revenue/statistics/tax-expenditures/index.aspx
Tax data does not specifically differentiate between SME and non-SME companies, but there are a number of metrics that can be used as a reasonable proxy for SME status.
For example, in respect of 2021 out of a total of 1,629 claimant companies, 1,431 or 88% of the number of claims, amounting to €190 million of R&D tax credit, were made by companies dealt with outside Revenue's Large Cases Division, which can be used as a proxy for SMEs.
One of the criteria for SME status is employee headcount, with companies having under 250 employees being in scope of the definition. Again in respect of the year 2021, 1,429 claims were in respect of claimants with under 250 employees, amounting to €194 million in R&D tax credit. Similar data in respect of prior years is also included in the Revenue report linked above.
On the second part of the Deputy’s question, there are no specific provisions for SMEs in the R&D tax credit, and nor are there any restrictions for SMEs wishing to avail of the scheme. It is available to all firms, within the charge to Irish tax, that undertake qualifying R&D activities. However, I am aware that Revenue issued updated guidance in 2017 with the specific aim to reduce the administrative burden for relatively small claims for SMEs and micro-companies.
The administration of the R&D tax credit is a matter for the Revenue Commissioners. The Tax Administration Liaison Committee (TALC) Sub-Committee on Simplification and Modernisation of Business Reliefs for SMEs provides a forum where Revenue and tax practitioners can identify opportunities to simplify and modernise the administration of business supports. The matters discussed by the sub-committee, which include the R&D tax credit, will inform recommendations in relation to administrative changes which may benefit SMEs.
I am also aware that Revenue participate in a number of initiatives to ensure that the availability of the R&D tax credit, and the activities in respect of which it is available, is communicated to firms of all sizes. For example, Revenue attend and speak at R&D events organised by IRDG, the IDA and Enterprise Ireland. Revenue has also established an R&D discussion group which provides a forum for Revenue and representative organisations to raise and address issues affecting the operation of the R&D tax credit.
I would also note that the refundable nature of the R&D tax credit can be particularly attractive to start-up companies or SMEs which are not making profits as the credit can effectively part-fund the R&D activity and act as a valuable source of cash-flow.
Finally, the Deputy may be aware that Finance (No.2) Act 2023, also introduced changes to the R&D tax credit which will benefit SME claimant companies and companies undertaking smaller R&D projects. For accounting periods commencing on or after 1 January 2024, the rate of the credit has increased from 25% to 30% and the threshold for payment of the credit in full in the first year rather than over the usual period of three years was increased from €25,000 to €50,000.
