Recent updates to the R&D Tax Credits scheme

The Research and Development (R&D) Corporation Tax Credit has been updated to incorporate the changes to the R&D credit introduced by Finance Act 2022.

In the ever-evolving landscape of R&D Tax Credit, staying informed about the latest changes is crucial for businesses looking to maximise their financial advantages. We have outlined an overview of the changes in legislation to the Finance Bill, the amendment to the Repayment Schedule, and further additional amendements to guidelines to take into consideration.

An overview of the changes in the R&D Tax Relief legislation from Finance Bill 2022:

• Revamp of R&D tax credit (766(A) to R&D corporation tax credit (766 C/D)
• Accounting periods beginning on or after 1 January 2022 may apply through either mechanism (transition period)
• If claiming through 766C/D during the transition period, the R&D corporation specified return 2022 document must be completed – R&D corporation specificed return
• Accounting periods beginning on or after 1 January 2023 will be bound to 766C/D
• Repayment mechanism has been altered – claimant companies can elect to receive full credit as cash payment through 766C opposed to requiring an initial offset versus corporate tax liability previously (766(A))

There was also an Amendment to Repayment Schedule – 766 C/D – which is much welcomed:

• Previously (766(A)) excess credit was repaid in equal installments over three years
• Repayment schedule has been changed for companies to receive:
  – Y1: The greater of €25,000 or 50% of the claim
  – Y2: 60% of the remaining credit
  – Y3: Remaining Credit

Please Note: Companies can opt for accelerated repayment of any remaining credits due under old mechanism during the first claim under 766 C/D. Repayment schedule has been defined for Section 766C/D as the date a valid claim is submitted as part of the CT1 return

Some additional amendments to Guidelines – 766 C/D

• Cloud Computing Costs associated with R&D activities are now eligible expenditure
• Pre-trading expenditure on R&D activities for all years pre-trading is now eligible for the R&D tax corporation credit in the first trading period – increased from previous limit of 12 months pre-trading
•  Section 766D specifically deals with building costs associated with R&D activities – however the guidelines and rules have not altered from previous years
• As a rule, claims by micro and small enterprises which are less that €50k and have been funded through Enterprise Ireland, Horizon 2020, Horizon Europe or IDA R&D grants will no longer be challenged through the science test by Irish Revenue

What Visiativ Ireland can do for you

As leading R&D Consultants in Ireland and the UK, we help clients ranging from indigenous SMEs to Multinational brands. We can support you through these changes – with advice and guidance or by managing part or all of the process. Contact us for further information