If your business engages in Research and Development (“R&D”) activities (including improvements to internal systems) an additional tax credit may be available to the business. R&D activities should involve some element of technological or scientific uncertainty and expenditure on both successful and unsuccessful R&D activities qualify for the tax credit.
The R&D tax relief can give a tax credit of 25% of the qualifying R&D expenditure in addition to the general tax deduction of 12.5%. This means for every €1,000 of expenditure, a tax saving of €375 can arise to the company.
The R&D credit can also be claimed as a cash refund by a company even if the company has no corporation tax liability. This can generate significant cashflow benefits to a company during the development stage of a product when it is not yet generating sales. The refund can be claimed over three years and is subject to a limit of the corporation tax paid over last 10 years or the payroll liabilities paid by the company in the year.
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This can assist a company employ and retain the key staff required to carry out the R&D activities.
Any claim for the R&D tax credit must be made within 12 months of the year the expenditure incurred. The expenditure must also be tracked in sufficient detail to support the claim made. Early planning for this is, therefore, essential to ensure the business maximises the credit available to them.
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Barry McCarthy
Director
Taxation Services
