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Irish Companies Can Now Benefit From Earlier R&D Tax Credit Payments

Now more than ever, finances are getting tighter. Businesses right across the Republic of Ireland are being impacted by COVID-19 and any money available needs to work harder. However, there is still an opportunity for your company to receive a timely cash flow injection in the form of an R&D Tax Credits claim.

Background

The excess R&D Tax Credit system means that companies located in the Republic can claim 25% back for every €1 spent on research and development. Those which don’t have a Corporation Tax liability in any given year can obtain a cash refund from Revenue instead, which is paid back across a three-year period in three instalments.

We’ve talked more about R&D Tax Credits later in this article, and you can also read up on our R&D Tax Credits page.

What are the new measures?

At the beginning of April, the State’s tax collector announced that they are expediting payment of R&D Tax Credit claims to free up thousands of euros in cash for Irish businesses during the COVID-19 crisis. The new measures essentially mean companies can receive their R&D cash instalments earlier, rather than having to wait until September.

Example:

A company with a year end of the 31^st December 2019 is due to file its tax return by the 23rd September 2020 at the latest. However, it files early - in April 2020 - with an excess R&D refund due of ‘X amount’. This consists of R&D Tax Credits from the previous three years (the 3rd instalment that was due from 2017, the 2nd instalment due from 2018 and the 1st instalment from 2019). However, under these new measures Revenue will administer the refund immediately after filing, instead of waiting until after the 23^rd September 2020 (subject to Revenue checks).

This represents a huge leap forward from the norm, as Revenue is only required by law to pay cash refunds up to nine months after an accounting period ends. Furthermore, this acceleration of payments will provide a healthy cash injection during this time, should businesses qualify for the scheme.

Apply using MyEnquiries

To request for Revenue to expedite any 2020 instalments of excess R&D Tax Credits, you’ll need to use MyEnquiries. It’s a secure online service designed to allow you to send and receive correspondence to and from Revenue. Additionally, you will also need to have filed your Corporation Tax return form (CT1) for the accounting period ending in 2019.

To make sure requests are processed in a timely manner, they will need to be appropriately tagged within MyEnquiries. To clarify, your enquiry relates to “Corporation Tax”, and “R&D instalments payable in 2020”.

R&D Tax Credits: A quick guide

Reading this has probably thrown up several questions, so the experts at Myriad Associates have put together all the answers you need when filing your R&D Tax Credits claim this month.

What are R&D Tax Credits?

In short, the R&D Tax Credit incentive was designed to encourage innovation and investment in research and development. It’s calculated at 25% of qualifying expenditure and is used to reduce a company's Corporation Tax bill. Claims must be made within 12 months from the end of the accounting period in which the R&D was undertaken.

Latest figures released in 2018 show the Irish Government provided businesses with direct R&D incentives totalling €751 million that year alone. However, some businesses don’t realise that they qualify for R&D Tax Credits, or that they are not claiming their full entitlement.

Who can apply for R&D Tax Credits?

Has your company undertaken innovative work recently? Then it may well be eligible for R&D Tax Credits, particularly if the project outcome was uncertain.

If you can demonstrate that your work goes beyond any technologies already in existence, then you may well be able to claim.

The three points below offer a good barometer for what fits an R&D tax claim:

• Creating a brand new product, system or service
• Modifying an existing product, service or system
• Software made specifically to resolve an issue

A new problem, no matter how small the change, will be something that adds to the overall knowledge in your field and be eligible for R&D Tax Credits.

If you’re still unsure of your eligibility, you can calculate your savings and find out more by using the R&D Tax Credits Calculator.

How do businesses claim R&D Tax Credits?

Right now, it couldn’t be any easier or more accessible for any type of business.

Launched in 2017, Tax Cloud is a handy online portal that gives Irish businesses the ability to prepare their own claim exactly as if they were an R&D expert. Guiding you along the way, it ensures your claim is maximised - and at a much lower fee than traditional consultancy.

Applying this way during the current crisis is a potentially great option, as most consultancy based firms will charge substantially higher fees only to handle everything remotely anyway. Tax Cloud is easy to use and helps you put your claim together in four easy steps before creating the R&D tax claim report which is submitted to Revenue on your behalf.

What are the benefits of R&D Tax Credits?

In the here and now, a successful claim can provide your business with a significant non-repayable cash injection that will aid you during this difficult period.

In addition, however, once COVID-19 is a distant memory, it provides many small, medium, and large enterprises with the collateral to champion innovation and explore new development opportunities for your company that weren’t there before.

It is predicted that for every €1 spent on R&D Tax Credits approximately €2.40 in investment is injected into the Irish economy.

When do you need to apply?

The simple answer is as soon as possible.

Not only will this give your business a much needed cash injection, but the sooner you do it, the closer to the front of Revenue’s queue you will be.

Get in touch

Looking to discuss anything in this article? Perhaps you have questions about making an R&D Tax Credits claim and don’t know where to start. Call the Dublin-based Myriad Associates team for help on +353 1 566 2001 or use our contact form. We're working as usual during the COVID-19 outbreak and will be pleased to assist. Don’t forget to also take a look at our recent blog: What Advantages Does Tax Cloud Offer Irish Businesses?