The R&D tax credit aims at helping Irish research and development sector for continuous growth to become one of the global technology leaders, and creating new high-tech job opportunities in Ireland. For expenditure incurred in accounting periods commencing on or after 1 January 2009, the relief is calculated as 25% of qualifying expenditure. The credit is initially used to reduce the liability to Corporation Tax (CT) for that accounting period. Where a company has offset the credit against the Corporation Tax of the current and preceding accounting periods and an excess amount still remains, the company may make a claim to have the amount of that excess paid to it by Revenue in three instalments over a period of 33 months.
The first instalment to be paid will amount to 33% of the excess amount and becomes payable not earlier than the 21st day of the ninth month following the end of the company’s accounting period in which the R&D expenditure was incurred. The remaining balance of the excess amount will then be used to reduce the company’s Corporation Tax liability of the next accounting period (if it has not otherwise been discharged) and then if any of the excess amount still remains, a second instalment amounting to 50% of that amount remaining will become payable not earlier than 12 months after payment of the first instalment. With such arrangement, companies that carry out R&D work under the definition under Section 766, Section 766A and Section 766B of the Taxes Consolidation Act 1997 along with the assistance of the Revenue’s guideline can plan the R&D expenditure ahead of time.
Common concerns regarding filing an R&D Tax Credit Claim and how Braithwaite can help
While the tax relief provides a lucrative return of R&D investment, there are common concerns shared among companies that they may eventually waive such opportunity to help with their cash flow. With many years’ of experience to assist clients to claim the R&D tax credit, Braithwaite helps our clients to address such concerns.
We are not sure if we have qualifying work?
Revenue provides an interpretation of the legislation in terms of the R&D definition, and the requirements to submit the R&D claim in the latest Revenue Guideline. However, it is still different from our common understanding of what research and development activity may consist of. In addition, the understanding of such qualifying requirements may vary in different industries, such as IT/Software, Manufacturing, Biotechnology, Pharmaceutical, etc. With our expertise in different industries and experience to assist clients in various sectors, Braithwaite can help you to bridge such knowledge gap, and customise a methodology to identify the R&D project(s).
We are not sure if it is worth investing the efforts to prepare a claim?
In general, the preparation of the R&D claim may be segregated into two aspects, i.e., technical and financial. Whilst helping our clients to identify a potential project list for further study, Braithwaite will also conduct a high-level costing estimation (with client’s initial input) to assess the potential size of the claim. This will provide a risk assessment and cost/benefit study of the potential claim before our clients invest more efforts to prepare the claim. With such study, we will help our clients to make a better decision and understand the potential return of the investments.
We don’t have an internal process to track R&D efforts. How do we make a claim?
In addition to helping our clients to prepare a claim, Braithwaite also assist our clients to establish a methodology and process for both current and future claims. The experience and interaction with Revenue allows the Braithwaite team to have the most up-to-date understanding of the program and Revenue’s requirements. With such knowledge, Braithwaite can design a method that is applicable in our client’s work environment.
What if we are audited by Revenue?
As part of the tax return, it is common for Revenue to oversee and administrate the R&D filings. Braithwaite provides an end-to-end service, which covers the entire preparation of the claim as well as the potential Revenue reviews. Braithwaite has extensive experience in helping our client to go through Revenue reviews in various scopes, e.g., desk review, on-site review, etc. Therefore, when an audit happens, Braithwaite’s team will still be available to address any concerns and questions.
Braithwaite welcomes the opportunity to discuss any further questions you may have with the R&D Tax Credit. Contact the experts for your next claim!