Terence Flanagan (Dublin North East, Fine Gael)
Link to this: Individually | In context

Question 26: To ask the Minister for Finance if measures in respect of promotion of research and development are planned which have not been included in the Finance (No. 2) Bill 2008; and the proposals regarding same. [45182/08]

Brian Lenihan Jnr (Dublin West, Fianna Fail)
Link to this: Individually | In context

Apart from the increase in the rate of the tax credit from 20% to 25 %, which I announced in my Budget Statement, the Finance Bill includes a number of other very significant changes to the R&D tax credit scheme including: an option to carry-back unused tax credits for set-off against the previous year's corporate tax liability, thus generating a tax repayment; a further option, where there is insufficient or no corporation tax liability in the previous year, to claim payment of the remaining unused credit which will be paid in instalments over a 3 year period, these options will remove any uncertainty about the availability of the tax credit and ensure that a company will secure the full benefit of a tax credit arising in any year from 2009 over a relatively short period; the permanent setting of 2003 as the base year for calculating incremental R&D expenditure under the scheme. Over time, this will have the effect of turning the scheme into a volume-based scheme.

Finally, the Bill provides that a tax credit will be available in respect of a proportion of the expenditure incurred on a new or refurbished building used in part for R&D activities. Up to now, a building had to be used "wholly and exclusively" for R&D in order to avail of the tax credit on qualifying expenditure. This change reflects the reality that R&D takes place in manufacturing or production environments and not only in discrete laboratory conditions. In making this change, I would hope that we will not only encourage more R&D activity in these environments but that it will also capture the fruits of this additional R&D in production and other activities here.

I have no plans for further changes to the R&D tax credit scheme at this time.