By Emma Lewis, Tax Cloud Ireland
Turning a fantastic, innovative business idea into a reality is expensive. But did you know that thanks to R&D Tax Credits you can actually reclaim as much as €37.50 for every €100 of eligible R&D expenditure back from Revenue?
Despite the fact the R&D Tax Credits scheme has been around for almost two decades, far too many businesses in Ireland are still missing out. But with average claims sitting at around €55,000 – even for SMEs – it’s money that can certainly be put to good use.
What areR&D Tax Credits?
Research and Development (R&D) Tax Credits are offered by the Irish government as a way to encourage company innovation. Not only does such innovation advantage the company itself, but through growth and additional employment the wider economy benefits too.
If the company is profitable, R&D Tax Credits are awarded against the current year’s Corporation Tax. However, loss-making companies can claim too by receiving cash payments instead.
Many organisations claim in respect of a brand new product, service or process they’ve developed. Others will have substantially upgraded something that already exists – for example, an ice cream manufacturer creating a new flavour. As long as some advancement in science or technology has been made, and the results of the R&D work were not immediately obvious from the start, then R&D Tax Credits are likely to follow.
What costs can Irish businesses claim for under R&D Tax Credits?
The scope of projects and costs that come under R&D Tax Credits in Ireland is purposefully very wide. Common ones include:
- Employer costs like staff wages and pension contributions
- Overheads like gas,electricity and water (however these must be apportioned so you’re only claiming for what was actually used up as part of the R&D project itself)
- Materials (again, only those used up in the R&D project)
- Specific softwarethat’s had to be developed as part of the R&D project
This isn’t an exhaustive list however, which is why many companies use an online R&D claims portal to make sure they leave no money on the table.
R&D Tax Credits can make a huge difference
It’s no secret that times are hard and the costs of running a business in Ireland skyrocketing. Although the resulting cash from an R&D Tax Credits claim can be spent on anything a company chooses, many invest it back into R&D for continued, sustained growth. This of course then brings about more R&D Tax Credit claims further down the line, and the cycle of innovation and reward continues.
So what else do companies spend their R&D Tax Credits on?
Companies can spend their R&D Tax Credit award exactly as they wish, from settling debts to purchasing stock. However, some will reinvest it all back into R&D work, while others will split the award between further R&D work and spending it on other pressing business costs. It all depends on the needs of the business.
As well as reinvesting in R&D and other costs, companies often:
Purchase new equipment, plant and machinery
Older machinery and equipment can be inefficient to run and expensive to maintain. Many companies will therefore lower costs and increase productivity by using their R&D Tax Credits to buy or rent newer equipment.
Devise new processes
Some companies use the cash in developing new processes and systems to boost efficiency and profitability.
Employ subcontractors
With costs rising, employing more staff is a step too far for many companies – but work still needs to be done. Taking on freelancers and subcontractors can really help plug the gap, benefitting from top-drawer expertise without the commitment. An R&D Tax Credit award can help with the cost of this.
How do companies in Ireland claim R&D Tax Credits?
Although the Irish R&D Tax Credits scheme has been around for almost two decades now, the rules and guidelines surrounding it are updated frequently. As the years have gone by, the claims process has therefore become notoriously complex, with many hoops to jump through.
It’s for this reason that online R&D claims portals exist to help claimants succeed with a fully maximised claim.Yes it’s possible to make a ‘DIY’ claim online yourself, but it’s extremely hard to know exactly which costs can be claimed for and which can’t.This risks either overclaiming (which could land you with a Revenue investigation into your firm’s wider tax affairs) or underclaiming which means leaving cash behind.
Any R&D claims portal worth its salt will take you through the application process in a step-by-step fashion. You’ll also be able to get help with things like your R&D technical narrative, making sure nothing is missed out.
Ultimately, times are tough and any additional income that can be generated is certainly welcome. R&D Tax Credits is one avenue that’s well worth exploring.
