Research and development (R&D) drives business innovation, pushing the boundaries of what’s possible to overcome existing challenges and to create new opportunities. In a business context, R&D doesn’t have to refer to scientific work that’s been carried out by people wearing lab coats, it can be any systematic activity that’s led to an advancement of our current knowledge.
Viewed like this, it’s easier to understand that R&D is often already part of growth plans, as it’s natural for businesses to invest resources into projects and activities that will either refine existing process, products and services, or create new ones. In fact, businesses in Ireland invested €4,688m in R&D expenditure in 2022 alone.
How do businesses benefit from R&D?
Without constant improvement, businesses might lose their competitive edge. Ireland’s leading businesses have a constant process of development and improvement, which means they can address and even anticipate their customers’ needs and expectations. This isn’t just good for the business itself, it’s good for the whole economy. Innovations fuel economic growth, they create new markets, expand productive capabilities, and make things more efficient. Certain breakthroughs might also help to tackle big societal challenges like climate change or global pandemics.
This is why the Irish Government offers innovative businesses financial incentives in the form of R&D Corporation Tax Credits, which encourage investment in research and development to help stimulate the economy’s growth. The relief rate is 25% of eligible expenses, rising to 30% for accounting periods starting on or after 1 January 2024. The potential savings are huge, which is why businesses should review their innovative development projects, to see if they qualify for the benefit.
Which businesses are eligible for R&D Corporation Tax Credits?
To be eligible for R&D Corporation Tax Credits, a business must fulfil Revenue’s specific tax criteria, which means that:
- the applicant must be a company
- the company must pay Irish tax
- the R&D must take place within the EEA or the UK
- the company must not be claiming R&D relief from any other country.
The R&D activities themselves also need to fulfil certain conditions:
- they must be systematic, investigative, or experimental in nature
- they must fall within the field of science or technology
- they must involve either basic research, applied research, or experimental development
- they must aim to achieve scientific or technological advancement
- they must resolve a scientific or technological uncertainty
What are examples of business R&D projects?
Innovative projects by their very nature might include a whole host of different business activities. As long as your activities meet the criteria above, there’s a good likelihood that you can claim R&D Corporation Tax Credits. To give you an idea of what might qualify, here are some example R&D projects:
- Formulating a new cancer drug
- Improving the performance capability of machinery
- Developing a new or improved construction process
- Engineering a new sustainable biofuel
- Creating a new or significantly enhanced software solution to process synchronously millions of data
- Inventing a medical device
- Improvements to battery and energy storage technologies (e.g. efficiency, sustainability, and capacity)
- Creating an artificial intelligence programme to automate complex, repetitive tasks
- Development of renewable/sustainable materials
- Developing new or enhanced cybersecurity protocols for enhanced protection
- Developing a regenerative agriculture process
- Improving the hydrodynamics of a boat or aerodynamics of vehicles
- Using machine learning to improve or develop models for weather prediction and analysis
- Improving the accuracy of facial recognition software
This list isn’t exhaustive, but it gives an idea of the type of research and development projects that businesses might undertake. As long as the work isn’t routine, and relates to a specific scientific or technological advancement, you may qualify for R&D Corporation Tax Credits.
Which business sectors can claim R&D Corporation Tax Credits?
Businesses from any sector can potentially claim R&D Corporation Tax Credits, as long as they are undertaking eligible R&D activities that aim to achieve an advancement in science or technology. Revenue groups the sectors that currently claim into the following groups:
- Manufacturing
- Information & communication
- Wholesale & retail trade
- Professional, scientific & technical activities
- Financial & insurance
- Administrative & support services
- All other sectors
“All other sectors” is clearly broad and could cover anything from agriculture and architecture to construction and oil and gas. Again, eligibility for R&D Corporation Tax Credits just depends on the type of R&D activity undertaken.
How Leyton can help
Not sure if your business qualifies for R&D Corporation Tax Credits? We can help.
We have a team of specialist technical consultants who can assess your innovative business projects for R&D relief eligibility. As well as identifying qualifying expenses, they’ll guide you through the entire process, ensuring that your business is claiming everything you are eligible for while staying fully compliant with Revenue’s regulations.
Get in touch to find out more about how we can help.
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