Paschal Donohoe (Dublin Central, Fine Gael) | Oireachtas source

I move amendment No. 25:

In page 24, line 36, after “amount” to insert “or pursuant to section 766C(4)”.

I propose to take amendments Nos. 25 to 28, inclusive, together. Section 24 of the Finance Bill 2019 provides for several new measures to encourage micro or small-sized companies to undertake research and development activities and avail of the research and development tax credit.

One of these new measures provides for micro and small companies to submit pre-trading claims for the research and development tax credit, which is limited to offsets or repayments calculated by reference to payroll taxes and VAT liabilities for the same period. A technical amendment is necessary to ensure the existing clawback mechanism for research and development tax credit claims, and the standard penalty regime, will apply correctly in the event of an overclaim in respect of this new measure for pre-trading claims. I commend these amendments to the committee.

It may be of assistance to committee members if I now read the speaking note for section 24, which summarises the changes being introduced to the research and development regimes in this Bill. I will also circulate the speaking note to the committee in advance of Report Stage. It is the third speaking note we have agreed to circulate.

Section 24 of the Finance Bill amends the provisions of the Taxes Consolidation Act to provide for the research and development tax credit and for an accelerated capital allowance for expenditure on scientific research. The primary policy objective of the research and development tax credit is to encourage companies to undertake high value-added research and development activity in Ireland, thereby creating high-quality employment and investment. During the year, as part of the Department's initiative of focusing on tax incentives for smaller firms, a public consultation on the research and development tax credit was carried out. As a result of this, I am pleased to say this section provides for a number of enhanced supports for micro and small companies to encourage greater uptake of the research and development tax credit by smaller firms.

The rate of the research and development tax credit for micro and small companies will be increased from 25% to 30%. In addition, an enhanced and simplified method to calculate the payable element of the research and development tax credit based on twice the current payroll liabilities is being introduced. I am also providing for pre-trading claims to the research and development tax credit, limited to offsets or repayments calculated by reference to payroll taxes and VAT liabilities for the same period. These measures for micro and small companies are subject to a commencement order pending approval.

I am also making some amendments of general application to all claimants. The limit on outsourcing to universities or institutes of higher education will be increased from 5% to 15%. This will support the Government's policy of building the knowledge exchange system between industry and the education sector.

The section also provides for a number of amendments to improve the overall efficiency and administration of the tax credit. With regard to section 765, these amendments limit the availability of buildings accelerated allowances to buildings or structures, the construction or development of which is scientific research. It also provides that where a company may qualify for a scientific capital allowance and the research and development tax credit, both reliefs cannot be claimed in respect of the same expenditure. This is addressed as an anomaly in legislation identified by Revenue.