While R&D Corporation Tax Credits have benefited hundreds of companies in Ireland, many sectors are still underserved – either because businesses mistakenly believe that their innovations aren’t eligible for relief or because of a lack of awareness of the government scheme.
This is surprising, considering that Ireland has one of the fastest growing economies in the EU, having become a magnet for multinational corporations, particularly from the Big Tech sector. The business-friendly taxation, strategic location, close links to both the UK and the US, and EU membership have helped to attract giants like Google, Facebook, Microsoft, and Apple, transforming Dublin’s Grand Canal into the “Silicon Docks” – a prosperous technological hub that has become the envy of Europe.
Ireland’s reliance (or overreliance) on the big beasts of tech has created a unique environment for startups and other innovative businesses conducting R&D. On the one hand, the government is desperate to diversify the economy so that GDP is less reliant on foreign companies (as illustrated by the fact that just three companies contributed a third of all corporation tax paid in Ireland between 2017 and 2021, leaving the country subject to the accounting practices of large multinationals).
On the other hand, these tech giants need innovative solutions to a range of emerging technological challenges, such as data centre cooling systems consuming a significant amount of electricity and water (a problem that is only going to intensify with the AI revolution). In fact, data centres use as much as 21% of metered electricity in Ireland, according to the Central Statistics Office. New technological breakthroughs are needed if Ireland is to meet its net zero targets while remaining an attractive location for the Big Tech data centres.
Helping attract further investment in Ireland, and driving the growth of SMEs who are undertaking the necessary R&D to support the needs of multinational corporations, are just two of the reasons behind why the government offers R&D Corporation Tax Credits. The financial benefit provided by the scheme helps to de-risk projects, allowing businesses to experiment and develop innovative solutions. And it’s not just data centres where innovation is needed in Ireland. Other infrastructure, industrial and even residential projects are facing a host of challenges that need new solutions. The companies that are succeeding in these areas, by creating more efficient and sustainable products, processes and services, are perfectly positioned to benefit from the R&D relief that’s on offer.
Many companies are missing out on claiming valuable R&D Corporation Tax Credits
Many businesses don’t realise that their work is eligible for R&D Corporation Tax Credits and are therefore missing out on valuable tax incentives for work that they’ve already completed.
There’s a common misconception that R&D is only conducted either by Big Tech with silicon-based technologies like robotics or AI, or done in laboratories with test tubes by people wearing white coats.
But this just isn’t true. R&D can be part of typical problem-solving and modernisation and is commonplace in construction, manufacturing, engineering and even software-based industries. If your business is devoting resources to improving scientifically or technologically to stay commercially viable and competitive, then there is a good chance that your work might be eligible for relief.
Let’s take the construction industry as a specific example (as it’s an underserved sector when it comes to claiming R&D Corporation Tax Credits). It’s an industry that’s constantly developing because the work must meet new fire, structural or thermal energy regulations. Any projects that help to deliver these new standards through innovative design, materials, or processes are very likely to be eligible for R&D relief. It’s exactly the same for other industries where innovation is an essential part of staying competitive and meeting evolving regulations or market demands.
How to know if your project is eligible for R&D Corporation Tax Credits
A good way to know if your project is eligible for R&D Corporation Tax Credits is to ask yourself if it resulted in learning something new. Did you discover something that will influence the design of a future project? Can you point to any new discoveries? Is it something that you can now apply to future projects? For example, did your project lead to measurable cost-effectiveness, reduced material use while maintaining strength, or improved energy efficiency? Such knowledge gains are considered “advancements” for tax purposes.
An advancement occurs when you achieve something that hasn’t been done before. If you can identify newly acquired scientific or technical knowledge that hasn’t been previously established, then it’s very likely that those projects can be treated as research and development.
Making a successful R&D Corporation Tax Credits claim
Successful R&D Corporation Tax Credits claims must demonstrate that there’s been a deliberate and systematic approach to trying to resolve a scientific or technological uncertainty. This means that there needs to be a paper trail that proves that the work has been done, not only breaking down the costs but also telling the overall narrative of the project, including what your objectives were and how you sought to overcome uncertainties.
It’s all too common for businesses to find the work of gathering the necessary documents too burdensome and time consuming. As a result, they miss out on the relief they’re entitled to.
That’s where we can help. We have technically gifted consultants at Leyton who we pair with specific industries like pharma, financial services, construction, engineering and many other areas. They’re experts at producing the robust justifications, letting our clients carry on with their innovation.
They also understand scientific and technical undertakings in great detail, which is invaluable when working with Revenue commissioners who may not understand the technological complexity of certain projects. By explaining the tech and science to Revenue’s team in a simple yet detailed way that meets their requirements, Leyton can ensure confidence in accessing the tax credits that our clients are entitled to.
How Leyton can help
At Leyton Ireland, we’re always happy to have an informal chat to see if there’s potential for a claim.
We like to form partnerships with our clients, where both parties learn from each other to ensure the best possible outcome. For our part, we’ll learn about your expertise, your R&D, your objectives and your working methods. In turn, you’ll learn how to maximise your R&D claim, capture audit trails for rapid yet robust justifications, and what can qualify to help begin financially derisking future projects.
We’ve helped many businesses improve how they capture the necessary data and project information needed for a strong claim. As well as making sure that you’re compliantly claiming everything you’re eligible for, we’ll also help you integrate R&D into your current workflows and processes, increasing the potential benefit for future claims.
Get in touch to find out more about how we can help.
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