Neale Richmond (Dublin Rathdown, Fine Gael) | Oireachtas source

I do not want to add too much on the general research and development tax credit pieces as I would have spoken about that on Second Stage of the Bill and on my owned lived experience as a Minister of State in the Department of enterprise. I am sure Senator Higgins will join the whole House in welcoming the €80 million in additional funding for Ireland's higher level research sector that was announced just this morning by the Minister, Deputy O'Donovan, and this Government. It goes to the point that the research is good-quality research that is leading to very serious technological and medical advancements as well as creating a really high standard of jobs and conditions that are improving. I would have had a lot of opportunities, when I looked after space policy, to visit NovaUCD in UCD, where we see this cluster and the research being put into the development of really amazing start-ups that are working on everything from accessibility software to hydration software and everything else therein.

More pertinently, I will speak to the two recommendations made by Senators Gavan and Warfield. On the first one, regarding claims by micro and small companies, the Senators will be aware that the Finance Act 2022 introduced changes to the manner in which the research and development tax credit is claimed, including a new provision allowing for claims of up to €25,000 of research and development tax credit to be payable in full in year one instead of being spread over three annual payments. This provision, referred to as the first-year payment threshold, was increased to €50,000 in the Finance (No. 2) Act 2023, and I am now providing in this Bill for a further increase to €75,000. These increases provide a cash flow benefit for smaller research and development projects and are aimed at encouraging more companies to engage with the research and development corporation tax credit regime. As a result of these changes, claims in respect of qualifying research and development expenditure in a year of up to €250,000 will be payable in full in the first year. It is therefore expected that the majority of research and development claims by small and micro companies will be payable in full in the first year, going forward.

On the Senators’ second proposed recommendation, I note that foreign spending is most likely to be incurred through the outsourcing provisions, which allow for limited amounts of outsourced costs to qualify for the tax credit. There are two separate provisions, one for work subcontracted to third-level institutions located in the European Economic Area or the United Kingdom, and one for work subcontracted to other unconnected persons which is not limited by geographic scope. In both categories, the company is allowed to claim the research and development tax credit on qualifying expenditure of up to the greater of 15% of the eligible research and development expenditure incurred by the company itself or €100,000, subject to the company having incurred at least the same level of expenditure. We are all aware that, in various sectors, particularly the life sciences sector, this is very pertinent to making sure that research and development is actually fit for purpose in genuinely developing the research into a product that can be used in many areas. In this regard, I hope this information will be of some use but we will, obviously, be opposing the recommendation.