Emer Currie (Dublin West, Fine Gael)
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119. To ask the Minister for Finance if consideration has been given to allowing start-up SMEs to claim the research and development tax credit over a longer period of years, noting many start-ups may have low corporation tax liabilities in their early years; and if he will make a statement on the matter. [22580/25]

Paschal Donohoe (Dublin Central, Fine Gael)
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The Research and Development (R&D) corporation tax credit allows companies to claim a 30% tax credit in respect of expenditure incurred on qualifying R&D activities. The R&D corporation tax credit is available to all companies within the charge to Irish tax who are undertaking qualifying R&D activities.

I am mindful of the need to encourage more SME companies to engage with the R&D corporation tax credit and to ensure that the regime remains competitive when compared against other jurisdictions.

Prior to 2022, the R&D tax credit was first offset against corporation tax liabilities (if any) with the excess being, in general, payable to the claimant company in 3 annual instalments. The payable element of the R&D tax credit was subject to caps relating to either the amount of corporation tax paid by the company in the previous 10 years or a measure of the company’s payroll liabilities. However, this payment system was restructured in 2022 to align the R&D regime with newly-agreed international definitions of ‘Qualified Refundable Tax Credits’. A new fixed three-year payment structure was introduced, which in general provides that 50% of the credit is payable in year one, 30% in year two and the final 20% in year three. This has accelerated the benefit of the R&D tax credit for many claimant companies, including small and start-up companies.

In addition, a new first-year payment threshold was introduced, with claims for R&D tax credit of up to that amount being payable in full in the first year of claim. The threshold was introduced at €25,000 in Finance Act 2022, subsequently increased to €50,000, and now stands at €75,000. This provides further cash-flow support by accelerating payment of the credit for smaller R&D projects.

In general, the refundable nature of the R&D corporation tax credit and the first-year payment threshold are of particular benefit to early-stage and/or less profitable companies, and to companies undertaking smaller R&D projects, as they can effectively part-fund the R&D activity and act as a valuable source of cash-flow.

These enhancements to the R&D tax regime show the Government's commitment to the regime, encouraging companies to engage with the regime whilst also maintaining focus on supporting productive and innovative businesses in the State.

As announced in Budget 2025, and in line with the Programme for Government ‘Securing Ireland’s Future’, a commitment was given to examine options to enhance the R&D Tax Credit, reward innovation and digitalisation and ensure Ireland has the global best in class incentive to encourage innovation by both domestic and international companies. An evaluation of the R&D regime is currently taking place, including a public consultation which is open for submissions until 19 May (www.gov.ie/en/department-of-finance/consultations/public-consultation-on-the-research-development-tax-credit-and-on-options-to-support-innovation/). The outcomes of this evaluation will inform any further considerations for enhancements to the R&D corporation tax credit.