Ms Deirdre Donaghy:

As the Deputy said, in Finance Act 2019 we introduced some measures which were introduced following the budget that year. We did a review in that year specifically looking at aspects of small companies and how we could try to incentivise that. A number of measures were introduced. It was intended they would operate by having the existing research and development tax credit which is available to everybody and gives a rate of 25%. Micro- or small-enterprises would be able to top that up by an extra 5% in order to get an overall rate of 30%. As that element would be targeted it would have to get state aid approval because it would be a targeted aid. When we began discussions with the Commission on that we looked at the various ways in which it could be introduced under the various approvals processes that exist. Essentially in order to approve it we would have to make slight changes to the definitions, for example, the definition of what qualifies as research and development or to the reporting procedures that would apply and to how it is declared and reported as an aid. The difficulty created there was that, for example, if you were doing €100 worth of research and development in order to get a credit of €25, you would have one sets of rules applying to it, and to get the next €5 credit there would be slightly different rules. That would mean that some of the €100 might not qualify and then again something else that did not qualify for the main €25 credit could potentially have qualified for the €5. They did not match up. We were talking about small and micro companies and some of the biggest issues they consistently raise with claiming the credit in the first place is that there is an administrative burden to it and they have a difficulty in understanding and following the criteria and having the right documentation to prove it and meet the science tests. If we then brought in a system where one set of rules applies to the first 25% of the credit and slightly different rules for the next 5% that would have been overly complicated and we did not think it would be practical to do that.