Wednesday, 4 May 2022
Department of Finance
150. To ask the Minister for Finance if accessing research support funding from Enterprise Ireland, IDA, Disruptive Technologies Fund or any other Government programme that financially supports research and development in the private sector impacts a company’s ability to access the research and development tax relief in the form of a payable credit; if in relation to the R&D tax relief any R&D expenditure funded by a Government supports are excluded from the calculation of the R&D tax relief; and if he will make a statement on the matter. [22271/22]
The research and development (R&D) tax credit allows a company to claim a 25% tax credit in respect of expenditure incurred on qualifying R&D activities. In making a claim for the R&D tax credit, companies must satisfy two tests: the activity must be a qualifying activity (a science test); and the amount of the claim must be based on R&D expenditure incurred (an accounting test).
A company that receives research funding from Enterprise Ireland, IDA, Disruptive Technologies Fund or any other Government programme that financially supports R&D activities may still qualify for the R&D tax credit where the company incurs qualifying R&D expenditure.
However, where R&D expenditure is met directly or indirectly by grant assistance from any of the bodies listed above, or from any State or other body, that expenditure will not be considered as having been incurred by the relevant company and therefore would not qualify for the R&D tax credit in any form, whether relief is granted as a repayable credit or not.
The legislation in question is under Section 766(1)(b)(v) which explains that expenditure shall not be regarded as having been incurred by a company if it has been or is to be met directly or indirectly by grant assistance or any other assistance which is granted:
by or through -
(I) The State or another relevant Member State or the European Union, or
(II) any board established by statute, any public or local authority or any other agency of the State or another relevant Member State or an institution, office, agency or other body of the European Union, or
(III) a state, other than the State of Member State referred to in clause (I), and any board, authority, institution, office, agency or other body in such state;
It should be noted that Member State includes the UK for the purposes of this definition.
In summary, a company can claim the 25% tax credit on expenditure incurred on R&D as reduced by any grant assistance or any Government support received in respect of the same R&D activities.