What are your main post-Budget 2027 and Finance Bill observations on the R&D tax credit?
Contributor: Imran Khan, Director, Tax, BDO
Budget 2027 and the proposed Finance Bill measures are welcome enhancements to Ireland’s R&D Tax Credit regime. The credit provides a 35% benefit for qualifying R&D expenditure.
The proposed increase in subcontracting limits is particularly positive, covering third-level institutions and unconnected third parties, from the higher of 15% of qualifying in-house R&D expenditure or €100,000, to the greater of 20% or €200,000, subject to applicable in-house expenditure restrictions. This should give companies flexibility to access external expertise and collaborate with third-level institutions. However, excluding connected-party subcontracting could be seen as a missed opportunity to reflect multinationals’ global R&D activities and strengthen the international competitiveness of Ireland’s R&D Tax Credit regime.
The increase in the first-year payment threshold from €87,500 to €105,000 is welcome, allowing the first €105,000 of a claim to be paid in year one. Changes to preliminary corporation tax provisions should provide cash-flow benefits. Where second or third instalments from prior claims are treated as overpayments and offset against corporation tax payable, the amounts offset would reduce the liability used to calculate preliminary tax for that and the subsequent accounting period.
The proposed 5% uplift in qualifying R&D employee emoluments recognises supporting costs associated with R&D.
Also announced in the Budget was recognition of regulated clinical trials as satisfying the science test, with the relevant legislation expected to be included at Committee Stage.
These measures provide further support for innovation and strengthen Ireland’s R&D Tax Credit regime.
Content adapted from Finance Dublin Irish Tax Monitor.