The research and development (R&D) tax credit allows a company to claim a 25% tax credit in respect of expenditure incurred on qualifying R&D activities. In making a claim for the R&D tax credit, companies must satisfy two tests: the activity must be a qualifying activity (a science test); and the amount of the claim must be based on R&D expenditure incurred (an accounting test). A claim for the R&D tax credit is made on a self-assessment basis.
Revenue have taken a number of steps in recent years to assist companies with making claims for the R&D tax credit, particularly small and micro companies. In February 2017 Revenue issued guidance aimed at reducing the administrative burden for small and micro companies in relation to claiming the R&D tax credit. The aim of this guidance is to give smaller companies greater clarity in how they can demonstrate to Revenue that their R&D tax credit claim satisfies the science test. Where a company spends up to €200,000 on activities which Enterprise Ireland or other such bodies have reviewed and confirmed as R&D, then in most cases Revenue will accept that those activities pass the science test. Revenue may still review the claim to ensure that the accounting test has been satisfied.
To further assist companies in making R&D credit claims, in 2019, Revenue published updated guidance on the operation of the R&D tax credit and the expected level of records to support a research and development tax credit claim. Revenue has also presented at conferences around the country, which are attended by companies, advisors and educators, to build awareness of the R&D tax credit.
As with all tax expenditures, officials in my Department frequently monitor the credit and regular engagement with stakeholders is facilitated. As the Deputy may be aware, the Programme for Government commits to continue to encourage greater take-up of the R&D Tax Credit by small domestic companies, by building on recent changes and examining issues with respect to the pre-approval procedures and reduced record keeping requirements. These issues will be examined by my Department, in conjunction with other Departments and stakeholders, in due course.