Ireland's R&D Tax Credit Scheme: Recent Updates

Ireland is a prominent global hub for research and development (R&D), partly due to its competitive corporate tax incentives. A key driver of the country's innovation ecosystem is the R&D tax relief scheme, which allows companies with qualifying R&D activities to claim back money spent on R&D.

Through ongoing efforts to incentivise local start-ups and multinational investment, Ireland has updated its flagship innovation incentive. This article looks at some of these recent updates from Revenue and provides practical guidance for businesses to maximise their benefit from these incentives.

Overview of Ireland’s R&D Tax Credit Scheme

The R&D Tax Credit Scheme was introduced in Ireland in 2004 to incentivise investment in innovation. Under this scheme, companies are eligible to receive a tax credit of up to 30% of their qualifying R&D expenditure, which can be offset against the company's corporation tax liabilities. This is in addition to the standard 12.5% corporation tax deduction. The tax credit rate is 25% for accounting periods starting before 1st January 2024 and 30% for accounting periods starting on or after that date.

To qualify for the credit, companies must seek to advance science or technology through experimentation. The work undertaken should not be routine or easily deducible improvements, and companies must demonstrate their research outcomes were not readily available or known within their industry before their research activities.

Eligible R&D expenditure encompass employee costs, materials used in the R&D process, and outsourced R&D activities. Capital expenditure on plant and machinery used in R&D activities is also eligible for relief, making the scheme particularly attractive for companies involved in capital-intensive R&D projects.

To learn more  - Visit our dedicated guide to R&D tax credits in Ireland

Recent Updates to Ireland’s R&D Tax Credit Scheme

The Irish government has introduced modifications for 2024 to improve the scheme's transparency, accessibility, and efficiency. This update is anticipated to offer clearer guidelines and simplify the claims process.

For accounting periods starting on or after 1^st January 2024, some companies claiming R&D tax credits must notify Revenue before submitting the claim. This "pre-filing notification" is obligatory for first-time claimants or those who have not made a claim in the preceding three accounting periods. The notification should be made with Revenue’s official form at least 90 days before the R&D tax credit claim.

ABC Ltd aims to claim its first R&D tax credit for an accounting period of 1^st January 2024 to 31^st December 2024. It plans to submit its claim using the completed Form CT1 by 31^st March 2025. XYZ Ltd must provide its pre-filing notification to Revenue by 31^st December 2024, which is at least 90 days before its planned submission.

However, any company that has made a claim within the last three years before submitting will be exempt from this pre-filing requirement. Consistent claimants can continue using the scheme without extra admin.

XYZ Ltd claims for the 2021 year (the accounting period following the calendar year) but does not make a claim for 2022 or 2023. For the 2024 period, XYZ Ltd does not need to submit a pre-filing notification, as it made an R&D claim in at least one of the three preceding accounting periods.

R&D tax claims must be made within 12 months from the end of the accounting period. Therefore, the last day to submit a pre-filing notification is 90 days before this date. We advise submitting a pre-filing notification as soon as possible to avoid disappointment.

ABC Ltd has until 31^st December 2025 to make a claim for the 2024 period. The last date the company can submit its pre-filing notification is 2^nd October 2025 (90 days before the deadline for claim submission).

The pre-filing requirement is designed to prevent companies from making spurious claims. It follows the UK’s equivalent measure for new companies.

How Does the Pre-filing Notification Work?

The pre-filing notification form requires detailed information, including:

1. Company Information: The company's name, address, and corporation tax number.
2. R&D Project Overview: The number of employees involved, the number of projects being claimed and the amount of funding and/or grants received.
3. R&D Project Details: A description of the R&D activities being carried out.

Companies claiming expenditure on qualifying buildings or structures used for R&D purposes must complete a separate form. This includes confirmation of the building's status as a qualifying structure, the proportion of the building being used for R&D activities, and disclosure of any financial assistance received.

Both forms have a space for companies to provide any additional information they believe may be helpful.

Companies are required to submit the pre-filing notification through the MyEnquiries platform, selecting "Corporation Tax (CT)" as the category and "R&D Pre-filing Notification" as the subcategory. When the company files its CT1, it should indicate that the pre-filing notification has already been submitted to Revenue.

The level of detail required is not specified, but we recommend describing at a high level what the advance sought was, what the uncertainties were, the state of the art in the wider field of science or technology and the work done in the period. This will inform the full R&D tax claim (submitted by CT1) later.

Filing a Corporation Tax Return Using Form CT1

In Ireland, companies are required to file their annual corporation tax return using Form CT1, submitted through the Revenue Online Service (ROS). Form CT1 covers various elements of a company's financial activities, including profits, losses, tax credits, and allowances.

Companies engaged in qualifying R&D activities can claim an R&D tax credit on Form CT1. This credit amounts to 25% or 30% of qualifying expenditures on R&D projects, depending on the accounting period start date. The credit can be used to reduce a company’s corporation tax liability. If the company has no liabilities, the credit may be carried forward or received in cash instalments. To claim the R&D tax credit, companies must include specific details in the relevant sections of the form, such as:

• Description of R&D activities: A brief explanation of the R&D projects carried out.
• Qualifying expenditure: Amounts spent on employee salaries, plant and machinery, and other qualifying costs related to R&D.
• Grant Funding: Expenditure must be reported net of any grants or financial assistance received.

What Does This Mean for Irish Companies?

To mitigate potential disappointments or setbacks, first-time claimants or those returning to make claims after a break must ensure they submit the pre-filing notification form to Revenue well in advance of their planned submission.

The key takeaways for this regulation update are:

• Rules are changing for accounting periods beginning on or after 1^st January 2024.
• First-time claimants and claimants who have taken an extended break from claiming (at least the last 3 accounting periods) will be affected.
• Pre-filing notifications must be submitted at least 90 days before the submission of the R&D tax claim.
• Pre-filing notifications are not the same as the R&D tax claim; both must be submitted for a company to claim an R&D tax credit.

How Myriad Can Help

Myriad keeps up to date with the changing rules and regulations so you don’t have to. Our team of dedicated specialists in R&D tax matters has experience making claims for start-ups, SMEs and large, multinational companies. We recognise the complexities involved in making a tax relief claim, and we have the expertise to assist you at every stage.

For a free eligibility check, or to confirm whether your company will be affected by the pre-filing notification rules, contact us at +353 1 566 2001 or using our contact form.