If your company claims Ireland's R&D tax credit, the Finance (No. 2) Bill 2026 is where the Budget 2027 announcements become draft law. The credit stays at 35%, but the Bill changes how much of your spend you can include and how quickly you're paid.
We covered the announcements in our Budget 2027 guide. This post looks at what the Bill itself says, when the changes would start and what they could be worth to you.
What does the Bill change?
The Government published the Finance (No. 2) Bill 2026 on 19 October 2026, and enactment is expected before the end of the year. Four R&D measures are included:
- Higher subcontracting limits for work outsourced to universities and unconnected third parties
- A higher first-year payment threshold of €105,000, up from €87,500
- A wider preliminary tax offset, covering your second and third instalments as well as your first
- A 105% rule for R&D wage costs, which delivers the 5% uplift from the Budget
The Budget also announced that regulated clinical trials could satisfy the science test. That measure isn't in the published Bill, and it's expected at Committee Stage.
When would the changes start?
The changes apply to accounting periods with a specified return date on or after 23 September 2028.
The first accounting period to be affected is one ending 31 December 2027, since its return date is 23 September 2028. Claims ending before this stay on the current rules.
How much more subcontracted R&D can you claim?
Each subcontracting cap, one for universities and one for unconnected third parties, is currently the greater of 15% of your qualifying in-house R&D spend or €100,000. The Bill moves both to the greater of 20% or €200,000.
A software company spends €800,000 on qualifying in-house R&D and pays an unconnected specialist firm €240,000 to build part of a recommendation engine. Under the current rules, the cap is the greater of €120,000 (15% of €800,000) and €100,000, so €120,000 can be included. Under the new rules, the cap is the greater of €160,000 (20%) and €200,000, so €200,000 can be included. That adds €80,000 of qualifying spend, worth €28,000 of extra credit at 35%.
The Bill changes the figures only, so you'll still need qualifying R&D of your own alongside the outsourced work.
If you rely on a university lab or a specialist firm, our guide to claiming R&D tax credits for subcontracted work covers the current rules in full.
What does the €105,000 first-year payment mean for you?
Your credit is normally paid in three annual instalments, and the first is the greater of the threshold (or your whole credit, if it's lower) and 50% of the credit. Our guide to the three-instalment payment system shows how it works.
Under the Bill, any credit up to €105,000 is paid in full in year one. Credits above that get a bigger first instalment, and the change stops mattering once your credit reaches €210,000, because 50% of it already exceeds the threshold.
A company with a €120,000 credit currently receives €87,500 in year one, then €19,500 and €13,000 in the following two years. Under the new threshold, it receives €105,000 in year one, then €9,000 and €6,000. The total is the same, but €17,500 arrives sooner.
How does the preliminary tax change work?
You can choose to treat an R&D credit instalment as an overpayment of tax and offset it against your corporation tax. At the moment, only your first instalment counts towards your preliminary tax calculation. The Bill extends this to your second and third instalments, so the amount you offset reduces the corporation tax figure your preliminary tax is based on, for that period and the next.
If you're a repeat claimant with a steady corporation tax bill, your earlier instalments start working for you sooner.
How does the 105% wage rule work?
In Budget 2027, the 5% uplift came with a condition about a "sufficient level" of expenditure that wasn't defined. The Bill now defines it.
Where your R&D employees' pay qualifies as R&D expenditure, 105% of that amount is treated as qualifying, provided you've got other deductible trading costs, such as rent, insurance and administration, of at least 5% of your R&D wage costs.
On our reading of the drafting, you either meet the 5% test or you don't get the uplift.
A software company has €750,000 of qualifying R&D wage costs and €60,000 of other deductible trading costs. The test requires at least €37,500, so it's met. The wage costs are treated as €787,500, which adds €37,500 of qualifying spend and €13,125 of credit. If its other trading costs were only €30,000, the uplift wouldn't apply.
The uplift rests on your wage costs, so the evidence behind them matters more than before. If you don't track time in detail, our guide to claiming R&D tax credits without timesheets is a good place to start.
What should you do now?
Nothing changes in your claim until the Act is passed, and the main changes then apply from the 2027 accounting period for a 31 December year end.
The Bill is still passing through the Oireachtas, and amendments are expected at Committee Stage.
This is a good moment to compare your subcontracting spend with your in-house R&D spend, and to check whether your other trading costs would clear the 5% test. It's also worth making sure you're keeping the records Revenue expects to see.
Key takeaways
- The main changes start with a period ending 31 December 2027. The changes apply to periods with a specified return date from 23 September 2028. Your 2026 claim follows the current rules.
- Subcontracting limits rise to the greater of 20% or €200,000. This matters most if you work with universities or specialist firms.
- Credits up to €105,000 are paid in full in year one. This is going up from €87,500.
- The wage rule has a defined test. You need other deductible trading costs of at least 5% of your R&D wage costs.
- The rate stays at 35%. The Bill improves how the credit works rather than raising the percentage.
If you'd like help understanding how the Finance (No. 2) Bill 2026 affects your claim, get in touch and we'll walk you through it. At Tax Cloud, our tax and technical experts keep on top of legislative changes so you don't have to.
