{"id":959,"date":"2024-05-21T10:21:02","date_gmt":"2024-05-21T10:21:02","guid":{"rendered":"https:\/\/leyton.majjane.agency\/ie\/insights\/articles\/qualifying-rd-expenditure-what-can-you-claim\/"},"modified":"2026-08-20T11:30:23","modified_gmt":"2026-08-20T09:30:23","slug":"qualifying-rd-expenditure-what-can-you-claim","status":"publish","type":"article","link":"https:\/\/leyton.com\/ie\/insights\/articles\/qualifying-rd-expenditure-what-can-you-claim\/","title":{"rendered":"Qualifying R&D expenditure: What can you claim?"},"content":{"rendered":"\n

If your business is carrying out research and development (R&D), there\u2019s a good chance that you\u2019ll be able to claim tax credits for your innovations.<\/p>\n\n\n\n

The R&D Tax Credit<\/a> is calculated as 25% of qualifying expenditure (increasing to 30% for accounting periods beginning on\/after 1 January 2024), which can deliver significant savings for your business. These savings can be reinvested in more R&D or in other areas of your business, such as hiring new staff, training, or other areas of growth. The Revenue uses a very specific definition for qualifying R&D expenses, which are limited to \u201cin the carrying on\u201d of qualifying R&D activities. This essentially means that expenses must be directly and actively involved in the R&D process itself. While the definition is very specific, most innovative businesses are still able to claim for a broad range of expenditure on their R&D work.<\/p>\n\n\n\n

Below, we summarise claimable expenses for the R&D tax credit, as listed in Revenue\u2019s Research and Development Tax Credit<\/a> manual.<\/p>\n\n\n\n

Staff costs<\/h3>\n\n\n\n

Staff costs, including salaries, bonuses, pension contributions, health insurance, and other benefits dedicated directly to employees working on qualifying R&D activities can be claimed. These costs must be apportioned to reflect the balance of R&D effort; for example, if an employee spent 50% of their time on R&D and 50% of their time on other projects, then half of their staff costs can be claimed.<\/p>\n\n\n\n

Materials<\/h3>\n\n\n\n

The cost of materials and supplies consumed directly in the R&D process are eligible for R&D tax credits, but only <\/a>after removing the saleable element (i.e., the materials must only be used for testing and prototyping and not sold on).<\/p>\n\n\n\n

In circumstances where there is a saleable product at the end of the R&D, you must deduct the lower amount of either the original material cost or the potential resale value.<\/p>\n\n\n\n

Utilities<\/h3>\n\n\n\n

Utility costs such as gas, electricity and water are all considered eligible expenses for R&D tax credits, but only if they have been consumed specifically in R&D activities. In these circumstances, it’s reasonable to use an apportionment to claim the tax credit.<\/p>\n\n\n\n

Subcontracting<\/h3>\n\n\n\n

Companies can claim R&D Tax Credits for subcontracted work under specific circumstances.

Firstly, businesses can subcontract qualifying R&D activities to universities or institutes of higher education from an EU Member State. If they do so, they can claim a tax credit of up to the greater of 15% of their own R&D spending or \u20ac100,000 annually.<\/p>\n\n\n\n

Secondly, a company can claim R&D tax credits on costs incurred when subcontracting qualifying R&D activities to another business or when using agency staff, provided the subcontractor is not a connected party. Again, the R&D tax credit is limited to the greater of 15% of the company’s own R&D expenditure or \u20ac100,000 annually. However, the company needs to notify the subcontractor before the company settles its invoice to the subcontractor that it intends to use the payment in its R&D Tax Credit claim.<\/p>\n\n\n\n

Individual consultants hired to conduct sub-contracted R&D activities can be treated as direct employees for the purposes of claiming expenses provided they meet some specific conditions.<\/p>\n\n\n\n

Rental costs<\/h3>\n\n\n\n

Rental costs may be eligible but only if it meets specific requirements.

Is the rental space simply an area where R&D takes place along with the other activities (e.g., an office or manufacturing facility)? If this is the case, the expenditure is not eligible.<\/p>\n\n\n\n

If, however, the rented space is specialised in some way (e.g., it\u2019s a laboratory, clean room, technically unique space, etc.) so that the nature of the room itself is integral to carrying out R&D activity, then the rental costs for the space might be considered a qualifying expense.<\/p>\n\n\n\n

Cloud computing costs<\/h3>\n\n\n\n

Cloud computing costs incurred for the qualifying R&D activity are eligible for R&D tax credits.<\/p>\n\n\n\n

Royalty Payments<\/h3>\n\n\n\n

Expenditure on royalty payments may qualify provided they are for the purposes of R&D subject to requirements. More specifically, expenditure is not allowable where it includes amounts paid to connected persons and which is, income from a qualifying asset for the purposes of the Knowledge Development Box for the recipient.<\/p>\n\n\n\n

Can we claim for R&D expenditure R&D on our existing business operations?<\/h2>\n\n\n\n

It depends. Companies can claim an R&D tax credit for qualifying research and development expenses that are part of their existing business operations. However, only additional costs for R&D activities are eligible.<\/p>\n\n\n\n

What doesn\u2019t qualify as R&D expenditure?<\/h2>\n\n\n\n

Aside from the exceptions detailed above, some examples of expenditure are clearly defined as not being eligible for tax credits. These include general overhead costs such as:<\/p>\n\n\n\n