Pearse Doherty (Donegal, Sinn Fein)
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194. To ask the Minister for Finance the reason the 30 per cent research and development tax credit regime for small and micro companies provided in the Finance Act 2019 is not yet operable; and when it will come into effect. [42108/21]

Pearse Doherty (Donegal, Sinn Fein)
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224. To ask the Minister for Finance if he will provide an overview of the changes announced to the research and development tax credit for small and micro-companies in section 25 of Finance Act 2019. [43176/21]

Pearse Doherty (Donegal, Sinn Fein)
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225. To ask the Minister for Finance the date on which a submission was made to the European Commission for State Aid approval with respect to changes made to the research and development tax credit for small and micro-companies under section 25 of the Finance Act 2019; the status of this submission; the expected date of its approval; and if he will make a statement on the matter. [43177/21]

Pearse Doherty (Donegal, Sinn Fein)
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226. To ask the Minister for Finance the estimated cost in 2022 of amending the research and development tax credit regime by allowing small and micro companies to receive the credit in one instalment rather than three instalments over a 33-month period payable not earlier than the relevant tax pay and file date for the company’s accounting period in which the qualifying expenditure was made; and if he will make a statement on the matter. [43178/21]

Paschal Donohoe (Dublin Central, Fine Gael)
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I propose to take Questions Nos. 194, 224, 225 and 226 together.

In Budget 2020, I provided for the introduction of a number of enhancements to the R&D tax credit for micro and small companies, including an increase in the rate of credit and an enhanced method of calculating the payable credit.

Section 25 of Finance Act 2019 introduced new measures in respect of the Research and Development (R&D) tax credit for micro and small companies, however as these are targeted measures they require State aid approval from the European Commission, and were therefore introduced subject to a Commencement Order.

The planned measures for micro and small companies include:

- An increase in the R&D tax credit rate from 25% to 30%.

- The addition of an enhanced method to calculate the payable element of the R&D tax credit, based on twice the current year payroll liabilities.

- The introduction of a new provision to allow pre-trading R&D expenditure to qualify for an R&D tax credit, which is limited to offsets or repayments calculated by reference to payroll tax (PAYE and USC) and VAT liabilities for the same period.

- Officials in my Department began engagement with the Commission on this matter in March 2020. However the Deputy will be aware that this coincided with the onset of the Covid-19 pandemic, which required the immediate attention of officials both in Ireland and in the Commission to develop and implement measures to support businesses and employees affected by the public health restrictions.

- Since the onset of the pandemic, this Government has introduced extensive Covid-19 supports, many of which will have provided immediate support to small businesses to maintain a level of trade and retain their staff in employment.

- The measures specific to small and micro companies therefore have not yet been commenced, but the easing of public health restrictions and the reducing need for related support measures will allow greater scope for my officials to progress matters relating to the R&D credit.

- In respect of PQ 43178/21, I am advised by Revenue that future levels of expenditure on research and development is not known and therefore a cost for the year 2022 of the Deputy's proposed amendment cannot be estimated. However, based on information included in tax returns for 2019 (the most recent year available), the cash flow impact in that year would have been €25 million if the Deputy’s proposal had been implemented in that year for small and micro companies.

- The Deputy may also be interested in Revenue’s published information in respect of the research and development tax credit, which is available at: .