Pat Carey (Dublin North West, Fianna Fail)

I will try to be as helpful as I can to Senator Twomey. Since the scheme was introduced in 2004, expenditure on new or refurbished buildings used exclusively for research and development activities has attracted a tax credit of 20% of that expenditure, paid over a four year period.

Data emerging from the operation of the scheme suggest this part of the scheme is not being used. This probably reflects the fact that in many instances work on research and development takes place in production or manufacturing environments and not only in laboratory conditions. The Bill provides that a tax credit of 25% will be available from next year, subject to certain conditions on a proportion of the expenditure incurred on a new or refurbished building used in part for research and development activities.

In this way we hope to capture not just the benefit of additional research and development activities which may be undertaken in conjunction with production and other activities, but also to have the opportunity to benefit from the fruits of that research and development with the potential for additional production activities to be undertaken here.

The provision requires State aid clearance from the EU Commission, which the Department will pursue and will take effect by way of a commencement order when that clearance is obtained. The changes to the scheme providing for the payment of any unused tax credit which cannot be offset against current or prior year corporation tax liabilities is being introduced to give companies certainty about the availability of credit. Another advantage is that it will allow companies to plan their research and development activities in the certain knowledge that they will receive the benefit of the tax credit.