Tax breaks for R&D bolstered

This year’s finance bill will bolster the existing tax breaks for research and development (R&D) that are designed to encourage investment in these activities in the Republic.

The bill, which Minister for Finance, Michael Noonan, said today is focused on job creation, closes a number of gaps in the R&D regime and also gives effect to changes proposed in Budget 2012.

The budget changes were mainly aimed at small and medium-sized enterprises and include allowing all companies to outsource up to 10 per cent of their yearly R&D costs, or €100,000, whichever is the larger sum, and still claim the tax credits for the full amount.

They also permit companies to use the tax breaks to pay individual workers directly involved in research and development activities.

The Finance Bill closes a number of potential gaps that Mr Noonan said yesterday that the Revenue Commissioners have identified in the current legislation.

This includes changing the definition of R&D activities to rule out situations where the company claiming the tax credits merely manages the activity while it is carried out by others.

The bill also rules out clawing back credits where a company involved in R&D is dissolved, but the actual work is transferred to another group company operating out of the same building.

It also bars any R&D activity that already benefits from EU grant aid from claiming R&D tax credits.

R&D credits are given over a 10-year period to businesses that qualify for the tax break.