Michael Healy-Rae (Kerry, Independent)
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162. To ask the Minister for Finance if recommendations by an organisation (details supplied) will be examined; and if he will make a statement on the matter. [48985/18]

Paschal Donohoe (Dublin Central, Fine Gael)
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As part of the annual Budgetary and Finance Bill process, all taxes, reliefs and exemptions are subject to on-going review. The Department of Finance produces a TSG paper annually on Capital Taxes. This year's Capital Taxes TSG paper, which can be found at

, examined options to change both the CGT rate and the lifetime limit for the Revised Entrepreneur Relief.

Most recent estimates indicate that in the absence of behavioural change each 1% reduction in the rate of CGT was estimated to reduce yield by approximately €36m annually, while the cost to increase the lifetime limit for Revised Entrepreneur Relief to €5m or €15m was estimated at approximately €39m and €50m respectively.

Whilst all taxes are subject to ongoing review, you will appreciate that all policy choices with respect to changes in taxation are made from both a broader policy perspective and in the context of the financial resources available. In light of this, I decided not to amend the rate of Capital Gains Tax or the Revised Entrepreneur Relief as part of Budget 2019, however these matters will again be subject to review during preparations for Budget 2020.

In relation to R&D Tax Credits, the Office of the Revenue Commissioners have advised me that in putting together a claim for the R&D tax credit, companies must have regard to two interlocking parts: the claim must pass the science test (i.e. is the activity a qualifying activity) and the accounting test must be satisfied (i.e. is the amount of the claim correct). Revenue inform me that they have detailed R&D guidance on the operation of the R&D tax credit, for all companies, which is designed to remove some of the uncertainty that companies may have. Furthermore, Revenue advise me that they are currently working on guidance in relation to the level of records that they would expect to see to support a claim for the R&D tax credit. It is their expectation that this new guidance will give all companies greater certainty in advance of submitting a claim for relief.

In February 2017 Revenue issued guidance aimed specifically at micro and small companies, to reduce the administrative burden on SMEs while also ensuring that the credit is granted to bona fide R&D. The aim of this guidance was to give these smaller companies greater clarity on how they could demonstrate to Revenue that their R&D tax credit claim satisfied the “science test”. Where a company spends €200,000 on activities which Enterprise Ireland have looked at and confirmed as R&D, then in most cases Revenue will accept that those activities pass the science test. Revenue may still review that the accounting test has been satisfied.

As Revenue engage independent, case specific, experts where there is uncertainty in respect of whether or not the activities are qualifying R&D activities, any pre-approval would out of necessity be cumbersome and slow, potentially acting as a barrier to companies carrying out R&D. In respect of the accounting test, it is not possible to judge if an amount will be incurred in carrying on R&D until that R&D is actually carried out and that amount is actually incurred. As such, in addition to the difficulty of putting in place pre-approval in relation to the science test, it is not possible to put in place a pre-approval process for the accounting test.

Finally, Revenue advise me that all R&D claims are currently dealt with by their Medium Enterprises Division or Large Cases Division. There is an internal network of experienced R&D auditors from those divisions who meet and share their experiences. Revenue also engage with external stakeholders through the Tax Administration Liaison Committee (TALC), where there is a specific sub-group which looks at R&D issues.