Michael Noonan (Limerick City, Fine Gael) | Oireachtas source

It is ultimately intended that the base year of 2003 would be phased out over time and as resources allow. In the interim, section 21 of the Bill amends the definition of qualifying group expenditure on research and development by substituting "€300,000" for "€200,000". The effect of this is to increase the amount of group expenditure eligible for research and development tax credit, on a full volume basis without reference to the 2003 base year, from €200,000 to €300,000. This measure will reduce the impact of the base year on companies that had significant research and development expenditure in 2003 and will assist smaller companies to access the tax credit without reference to the base year. The phasing out of the base year, when complete, should improve the overall international competitiveness of the regime.

Section 21 increases the limit on the amount of research and development expenditure that can be outsourced to third parties from 10% to 15% on qualifying expenditure. In all, section 21 makes three amendments to section 766 of the Taxes Consolidation Act 1997 to implement the key recommendations contained in the review of research and development tax credits 2013, published on budget day. Section 766 provides for a tax credit of 25% for incremental expenditure on certain research and development activities over such expenditure in 2003, the so-called base year.