EC delay blow for firms seeking R&D tax breaks

Finance Minister Paschal Donohoe arrives at Government buildings with Budget 2019. Picture by Gerry Mooney

Samantha McCaughren, Business Editor

April 04 2021 02:30 AM

A range of measures to support small companies which were announced in the Budget in 2019, are still not available to firms.

An R&D tax credit rate for small and micro companies was due to increase from the standard rate of 25pc to 30pc.

However, Ireland needs State-aid approval from the European Commission before this measure can take effect.

It is understood that a number of companies were not aware that the R&D measures were not yet available until they attempted to claim the improved rate from Revenue.

According to Chartered Accountants Ireland (CAI), Ireland has been actively seeking approval for the improved R&D regime.

A more favourable methodology to calculate the refundable R&D tax credit amount for small and micro companies and a new section of legislation to enable small and micro companies to claim the R&D tax credit before trading commences are not effective until ministerial orders are signed, said CAI.

The enhanced R&D tax breaks would have appealed to companies affected by Brexit, as they would support research into new markets for their business and new product lines.

Small and micro companies are companies that employ fewer than 50 people, and whose annual turnover and/or annual balance sheet total does not exceed €10m.

Some 65pc of the 1,303 companies claiming the R&D relief in 2018 had 50 or few employees and potentially could qualify for the 30pc tax credit.

A spokesman for the Department of Finance said: “Officials initiated contact with the Commission in early 2020, however progress was hampered due to a switch in immediate priorities and the necessity to divert resources in response to the challenges associated with Covid-19 and the end of the Brexit transition period.

“Therefore, the measures for micro and small companies have not yet been commenced.

“Officials have resumed work on this matter again recently and would hope to have a more specific update in early course.”