If your company rents a lab, a specialised facility, or an office space to carry out R&D, you're probably wondering whether that rent can go into your claim. It's a fair question. Ireland's R&D tax credit is worth up to 35% of qualifying expenditure, and rent can be one of your bigger overheads.
The short answer is: sometimes. Revenue doesn't treat rent as an automatic yes or no. It depends entirely on what the space does for your R&D, not just where your R&D happens to take place.
What does Revenue actually say about rent?
Revenue's guidance is specific about rental costs, and it's worth reading closely before you make any assumptions. Here's the core test, taken directly from Revenue's Tax and Duty Manual (emphasis added by us):
"The eligibility of rental expenditure incurred by a company will relate to the extent to which it is incurred wholly and exclusively in the carrying on of the R&D activities... Where the nature of the rented space or facility is such that it is integral to the carrying on of the R&D activity itself, it is likely that the rent can be shown to be more than merely 'for the purposes of' or 'in connection with' the R&D activity."
This essentially means that renting somewhere to do R&D isn't enough on its own. The space has to be specific and necessary for the R&D itself, not just the location where it happens.
When rent qualifies: specialised facilities
Revenue's test for a specialised space is simple to state, even if it takes some thought to apply: could you have done the R&D without the specialised nature of that space?
If a laboratory, clean room, or similar facility is essential to your research, and the work genuinely couldn't have happened without it, the rent is likely to qualify.
A biotech company rents a clean room to develop a novel drug delivery mechanism. The controlled, contaminant-free environment isn't optional; without it, the experimental work can't be validated. The rent on that clean room is integral to the R&D and is likely to qualify.
When rent doesn't qualify: standard office space
A general office used by your R&D team is a different story. Revenue is direct about this one too:
"An office space is the setting in which R&D happens and does not itself perform a key function in relation to the R&D process; it is not integral to the R&D activity."
Your developers might do genuinely qualifying R&D work at their desks all day, but that doesn't make the desks or the office rent claimable. The space just needs to exist; it isn't doing any of the scientific or technological heavy lifting.
A software company rents open-plan office space for its full engineering team, including developers working on a qualifying R&D project. Nothing about the office itself is specialised or necessary to the research. The rent doesn't qualify, even though the R&D work carried out there does.
What about rent on a manufacturing facility?
This is where a lot of companies get caught out. If your R&D activity relates to improving a manufacturing process, you might assume the rent on that facility is fair game because the R&D physically happens there. Revenue says otherwise: rent on a manufacturing facility is unlikely to be eligible, even where the R&D activities can't be carried out anywhere else.
The reasoning comes back to the same wholly-and-exclusively test. The facility exists to run production. The R&D work happening within it doesn't change what the rent itself is for.
A manufacturer rents a factory floor to run production and also uses part of it to trial a new process that qualifies as R&D. The factory rent is paid to keep the whole operation running, not exclusively for the R&D trial. That rent isn't claimable, even though the trial itself may generate genuine qualifying expenditure elsewhere (in staff time or consumables, for example).
Can you apportion rent between R&D and other uses?
Revenue's guidance ties eligibility to "the extent to which" rent is incurred wholly and exclusively in R&D, which does leave room for apportionment in some cases. If you rent a specialised facility, like a lab, and only part of it is genuinely used for qualifying R&D, with the rest used for other purposes, you may be able to apportion the rent based on the proportion of the space, or time, dedicated to R&D.
That's different from an office or manufacturing facility, though. In those cases, the rent fails the "integral" test entirely, so there's nothing left to apportion. Apportionment only becomes relevant once you've established that the space is genuinely integral to your R&D in the first place.
If you're apportioning any cost category, including rent, keep a record of how you arrived at the split. Revenue expects a just and reasonable basis, not a round number. Our guide on apportioning R&D costs covers the documentation Revenue expects across every cost type.
What if Revenue queries your rent claim?
Rent is a cost category Revenue looks at closely, precisely because the line between "integral" and "just where the work happens" is a judgement call.
If you're including rent in your claim, be ready to explain why the space is specialised and what R&D couldn't happen without it. For more on how these reviews work, see our guide on what happens if your R&D claim is audited.
Key takeaways
- Rent isn't automatically excluded or included. Eligibility depends on whether the space is integral to the R&D itself, not simply where the R&D takes place.
- Specialised facilities can qualify. A lab or clean room is likely eligible if your R&D genuinely couldn't happen without its specialised features.
- General office space doesn't qualify. The office is just the setting; it doesn't perform a function in the R&D process itself.
- Manufacturing facility rent is unlikely to qualify, even when R&D activity happens on-site, because the rent isn't incurred wholly and exclusively for the R&D.
- Apportionment is possible for specialised spaces used partly for R&D and partly for other work, but only once the space has passed the integral test in the first place.
If you're not sure whether your rent qualifies, get in touch and we'll walk you through your specific setup.
