Get 25% TAX REFUND if you carry on R&D
Tuesday 24th, October
Posted on : Tuesday 01st, July 2014
NOT ALL R&D ACTIVITIES ARE CARRIED OUT BY MEN IN WHITE COATS IN A LAB
R&D tax credits are an additional 25% tax refund from revenue - if you think you carry an R&D activity, call RMcH.ie (01/8827600)right away and we l set you straight and hopefully get you nice refunds from the tax man(25% of cost incurred plus the 12.5% ct deduction, not bad!)
Good article by Donal, read on.
“The R&D credits have been intelligently improved getting better and better in successive Finance Acts,” says Donal Leahy, director with Baker Tilly Ryan Glennon.
However he cautioned, “On the ground, the mechanics of claiming R&D credits can prove a draw on resources and time consuming for companies, especially smaller indigenous companies making relatively small claims.”
He observed that large multi nationals with sophisticated R&D machinery around them are wise to the credits available in the area of R&D and are very successful in capturing those credits. “However, for many SMEs the administration bar for claiming R&D credits has been set too high and they sometimes fail to capitalise on the opportunities.”’
“For example small companies getting into the export market have limited resources and although they can apply for a generous R&D claim of 25 percent of R&D spend; I fully understand how they might be put off by the level of paperwork required and a feeling of uncertainty regarding their claim.”
Donal goes on to explain, “To successfully complete an R&D claim you need to have back up in the form of a dossier. With the right procedures and some professional assistance, this can be easily achieved; we traditionally helped large clients to make successful claims, but we now see increasing numbers of smaller clients benefitting from the relief. When Revenue investigate claims further they typically ask 23 specific questions, and we assist clients in having these answers prepared when making the original claim, well in advance of Revenue making any enquiries. We fully realise that this level of preparation is an investment by clients, but it is an investment work making.
The good news is that smaller companies are educating themselves about R&D credits and they are starting to reap the benefits. “It’s our job as tax consultants to sell the benefit of R&D credits to them – the relief was put in place to encourage R&D jobs and we are happy to promote the relief” said Donal.
“But we also have to respect that for some clients the level of administration involved is too much for them, they would rather concentrate their resources on other aspects of their business, and forego a generous tax refund”.
In terms of offering a solution to his dilemma, Donal suggests the introduction of a more innovative and less burdensome approach. “For example if one of the university research centres is working with an SME on a R&D initiative or similarly if Enterprise Ireland is actively supporting R&D, those criteria alone could satisfy Revenue for claims up to a €100,000 R&D spend, say, or a similarly modest amount.”
We would like to see Revenue encouraged along a path to be more flexible in their approach to R&D credits. The government has put in place generous reliefs and infrastructure in this space, now Revenue needs to echo that spirit, because the goal here is to create jobs and encourage R&D”, says Donal.
Donal concludes, “Revenue take a pragmatic and business focused approach when encouraging FDI into Ireland and that is to be applauded. It would be great if the government could encourage them to adopt the same approach for Irish SMEs, particularly ones who are doing as exactly what we want them to do by investing in R&D, leading the drive in the export market and creating jobs which are born in Ireland and will stay in Ireland.”
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