Pearse Doherty (Donegal, Sinn Fein)
Link to this: Individually | In context | Oireachtas source

44. To ask the Minister for Finance the status of changes announced to the research and development tax credit for small and micro-companies under section 25 of the Finance Act 2019; the reason engagement with the Commission began only in March 2020; when the changes are expected to commence; if he will consider amending the research and development tax credit in the context of Budget 2022 by allowing small and micro companies to receive payable credits in one instalment not earlier than the relevant tax pay and file date for the company’s accounting period in which the qualifying expenditure was made rather than three instalments over a 33 month period; and if he will make a statement on the matter. [44862/21]

Paschal Donohoe (Dublin Central, Fine Gael)
Link to this: Individually | In context | Oireachtas source

The Deputy will be aware that in Budget 2020, I provided for the introduction of a number of targeted enhancements to the R&D tax credit for micro and small companies and noted that these were being introduced subject to a commencement order, pending State aid approval from the European Commission.

Officials in my Department began engagement with the Commission on this matter in March 2020. This is a standard time-line for such a process as the legislation must first be enacted (Finance Act 2019 was signed into law on 22 December 2019) and then further work is required to prepare for, and schedule, discussions with Commission officials.

The Deputy will be aware that this period also 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.

It has been determined that, as the proposed micro and small company measures are targeted measures, in order to secure State aid approval it may be necessary to introduce some changes to the measures for micro and small companies in order to secure State aid approval. However, as the measures in their current form are enhancements to the existing general R&D credit, this could present a significant administrative challenge to both taxpayers and Revenue if different criteria were to apply to two elements of a claim for the same R&D costs. Adding complexity and administrative burden would be counter productive to the aim of assisting small and micro companies. My officials are currently working to develop options to progress this position in order to deliver the best outcome for small innovative companies, including options for other methods of support taking into account the significant changes to the wider economy since the measure was announced. The Deputy's suggestions will be taken into account in this process.

Over the last 18 months, the immediate priority of this Government has been to support businesses during the Covid pandemic. Revenue advise that the companies using the extensive Covid-19 supports were primarily SME companies, and the supports were primarily aimed at delivering immediate cash supports to enable affected businesses to maintain a level of trade and retain their staff in employment.

The need to attract early stage funding into new and innovative businesses has also motivated work undertaken by my officials over the last year to review the Employment and Investment Incentive Scheme (EIIS), with a view to identifying options to continue to make the EIIS more efficient and effective. I will be considering options in this regard in the context of Budget 2022.