Ireland’s R&D Tax credit scheme is one of the most valuable and underutilised reliefs available to Irish businesses. Many companies carrying out genuine innovation do not realise they qualify, or, if they do, they underestimate the value of what they can claim. Here is what you need to know.
What is the R&D Tax Credit?
The R&D Tax Credit allows Irish companies to claim back a significant percentage of qualifying research and development expenditure. For Accounting periods beginning on or after 1 January 2024, the credit rate is 30% of eligible spend. Budget 2026 announced a further increase to 35%, though implementation dates are yet to be confirmed.
Crucially, the credit works on top of the standard corporation tax deduction. Because R&D costs are already deductible against trading income, saving 12.5% in corporation tax, the combined effective benefit can reach 42.5% of qualifying spend. That means for every €100 your company genuinely invests in qualifying R&D, you can recover up to €42.50 in tax savings or cash refunds.
Who can claim?
Any company registered for Irish Corporation Tax may be eligible, regardless of size, sector, or profitability. The key requirements are that the activity qualifies as research and development under Revenue’s definition, and that the expenditure is incurred wholly and exclusively in carrying out those qualifying activities.
This is not just for technology or pharmaceutical companies. Irish manufacturers, food producers, Construction firms, software businesses, medical device companies, and agribusinesses have all successfully claimed. The test is the nature of the activity, not the industry.
What activities qualify?
To qualify, the activity must seek to achieve scientific or technological advancement, not merely an advance in the company’s own knowledge, but in the field generally and must involve the resolution of genuine scientific or technological uncertainty. In practice, this means your company is trying to do something that is not already known to be achievable through conventional means.
Common qualifying activities include:
- Developing new or significantly improved products, processes, or services
- Building new software systems where technical uncertainty exists
- Developing new materials or manufacturing processes
- Creating novel engineering solutions to problems without known solutions
Activities such as routine software updates, quality control, market research, or the replication of existing knowledge do not qualify.
What expenditure can be claimed?
Qualifying expenditure includes:
- Staff costs (salary, pension, PRSI) for employees directly engaged in qualifying R&D activity, in proportion to the time spent on qualifying work
- Consumable materials used in R&D activities
- Payments to third-party contractors for qualifying R&D (subject to a cap of 15% of qualifying in-house expenditure, or €100,000, whichever is greater)
- Payments to third-level institutions in Ireland, the EEA, or the UK (same limits as above)
Capital expenditure on buildings used wholly and exclusively for qualifying R&D can also qualify separately under a specific R&D buildings credit.
How is the credit paid out?
The R&D Corporation Tax Credit is paid in three annual instalments following the year of claim: 50% in Year 1, 30% in Year 2, and 20% in Year 3. Claims of up to €75,000 can be received in a single first-year payment, which is particularly helpful for smaller businesses managing cash flow. For each instalment, the company can choose to receive the credit as a cash refund from Revenue or as an offset against tax liabilities such as corporation tax, VAT, or Payroll taxes.
How do you make a claim?
The claim is submitted through your Corporation Tax Return (Form CT1) via Revenue Online Service (ROS), within 12 months of the end of the Accounting period in question. First-time claimants, or those who have not claimed in the previous three years, must submit a pre-filing notification to Revenue at least 90 days before making their claim.
Revenue audits R&D claims selectively. When an Audit occurs, Revenue will request a detailed technical narrative demonstrating the qualifying nature of each project and a financial breakdown of all costs claimed. Robust contemporaneous documentation, kept throughout the R&D process and not reconstructed after the fact, is essential to withstand scrutiny.
BCA’s tax team has expertise in preparing and supporting R&D tax credit claims for Irish businesses. If you believe your company may be carrying out a qualifying activity, contact us before your next year-end for an initial assessment. bca.ie