4 Changes Irish Revenue Has Made To The R&D Tax Credit Programme

Recently announced on Wednesday, April 28^th, 2021, Irish Revenue made some changes to the R&D Tax Credit Programme. These changes will affect each and every claim submitted to Irish Revenue. Some are related to COVID relief whereas others are directly related to R&D expenditures. Please see below the 4 changes released by Irish Revenue.

1. All wage subsidy schemes received from the state should be deducted from the R&D Tax Credit claim. Temporary Wage Subsidy Scheme (TWSS) and the Employment Wage Subsidy Scheme (EWSS). Any monies received from the Temporary Wage Subsidy Scheme (TWSS) and the Employment Wage Subsidy Scheme (EWSS) are considered assistance from the State and therefore expenditure met from such assistance will not qualify for relief.

2. Rent can be included, only if the building, office, or lab is specialised for R&D e.g., clean room or lab and without that space R&D can not be carried out. ”Where a company rents a specialised laboratory or a clean room in order to advance its R&D, the question to ask is whether or not the company could have undertaken the R&D activity without the specialised nature of the laboratory or clean room. If the activity could not have been carried out, then the specialised nature of the rented space can be said to be integral to the R&D activity the company is carrying on and, to the extent that the expenditure is wholly and exclusively incurred in the carrying on of the R&D activity, rent may be qualifying expenditure.”

3. Building & Structure: For these costs to qualify, at least 35% of R&D work must be representative of use of the building over 4 years, however due to COVID this has been extended to 5 years (Or 2020 can be excluded from the 4 years). ‘Where due only to the COVID-19 pandemic a company is not in a position to meet the ‘specified relevant period’ requirement for the year 2020, then the specified period may be extended to a five year period, and the requirement for R&D activities to represent at least 35% of all activities carried on in the building or structure over a four year period may exclude the year 2020 and the company can meet the requirement in the year commencing on the day after the ‘specified relevant period’ ends”.

4. Emphasis on notifying subcontractors: ”From 22/12/2019 this notification must be in advance of making the payment or on the date the payment is made, where the outsourced activity is undertaken by a person who could not claim the R&D tax credit (for example an individual, or by a non-resident 3rd party which does not have a branch in the State, a recruitment agency providing staff) then Revenue will accept that a notification is not required in these cases”.

For further information on the Irish R&D Tax Credit and how these changes will affect your next R&D Tax Credit Claim, contact Braithwaite Ireland.

Image Source: Nick Bradshaw