R&D Tax Credit Ireland

Any company within the charge to Irish corporation tax that undertakes qualifying R&D activities in a field of science or technology and incurs eligible expenditure can potentially claim the credit. There is no restriction by sector or company size.

Company level conditions

To claim the Irish R&D tax credit, a company must:

• Be within the Irish corporation tax net.
• Incur qualifying R&D expenditure itself, rather than simply funding a third party.
• Ensure the same costs are not also relieved for tax purposes in another country.

This covers Irish headquartered businesses, Irish subsidiaries of international groups and foreign companies with Irish branches, provided they meet the tax residence or permanent establishment tests.

Qualifying R&D activities

Revenue focuses on the nature of the work, not the job title or sector. Activities must:

• Be systematic, investigative or experimental.
• Take place in a recognised field of science or technology.
• Seek a genuine scientific or technological advance.
• Address scientific or technological uncertainty that a competent professional cannot readily resolve.

Examples of potentially qualifying work include:

• Developing new or substantially improved manufacturing processes.
• Creating novel software architectures, algorithms or platforms.
• Designing advanced materials, devices or formulations whose behaviour could not be predicted in advance.
• Engineering prototypes and pilot lines to test new concepts at scale.

Routine quality control, cosmetic changes and purely commercial innovation without technical uncertainty are excluded.

Qualifying R&D expenditure

Typical cost categories that may qualify include:

• Staff costs for employees directly involved in R&D, plus a reasonable share of support staff.
• Agency and contractor costs related to R&D projects.
• Consumables and materials used in experiments and prototypes.
• Certain software and cloud computing costs used directly for R&D.
• A proportion of utility and overhead costs properly attributable to R&D.
• Capital expenditure on buildings or plant used for R&D, under specific rules.

A core eligibility task for CFOs is to map the general ledger into these categories without overstating or omitting costs.

The main risks are misinterpreting eligibility, weak documentation, misallocating costs and missing procedural deadlines. These can lead to Revenue enquiries, cash clawbacks and increased scrutiny from auditors and the Board.

Common pitfalls include:

• Treating routine engineering or commercial work as qualifying R&D.
• Failing to segregate grant funded costs, which must often be excluded.
• Overreliance on top down estimates without adequate evidence.
• Lack of consistency across business units or territories.
• Missing pre notification or filing deadlines.

From a governance perspective, an uncertain R&D tax position can undermine reported earnings, create volatility in the effective tax rate and consume management time during enquiries. For many CFOs, the opportunity cost of a poorly managed claim is as significant as the direct financial risk.