Payment of Research and Development Tax Credit to be Expedited
To support Irish businesses’ and their cashflow. The Irish Revenue has announced that Payment of Research and Development Tax Credit is to be Expedited. This will bring forward the payment of installments of excess research & development tax credit where businesses are due a payment this year.
Under Ireland’s research & development tax credit, companies are allowed to reduce their corporate tax liability by 25% of qualifying expenditure.
If you’re wondering if your company qualifies for the research and development tax credit. The activity your company performs must satisfy all of the following conditions.
They should be able to demonstrate that:
- They’re systematic, investigative or experimental activities;
- They’re in a field of science or technology;
- And are involved one or more of the following research and development categories:
- Basic research,
- Applied research, or
- Experimental development.
Furthermore, they should be able to show that:
- They seek to achieve a scientific or technological advancement; and
- Involve the resolution of scientific or technological uncertainty.
Claiming Research and Development Credit
Initially the credit is used to reduce the liability to Corporation Tax for that accounting period.
In the event a company has insufficient corporation tax liability against which to claim the R&D tax credit in an accounting period. The tax credit may be credited against the corporation tax for the prior period.
In the scenario that a company is a member of a group. The credit can be allocated to other group members. Otherwise, the credit may be carried forward indefinitely or can be claimed by the company as a payable credit. This most recent announcement from Revenue is what concerns these claims for the payment of the R&D credit.
Installment Payments Research & Development Credit
In the event a company has offset the credit against its corporation tax liability for the current and preceding accounting periods and an excess amount still remains. The company may make a claim to have the amount of that excess paid to it by Revenue in three installments. This is over a period of 33 months.
In the announcement by Revenue it states that, in the exceptional circumstances of the Covid-19 Pandemic, and subject to appropriate check in selected cases. Revenue will expedite the payment of any installment of excess research & development tax credit that is due to be paid in 2020. Thus bringing forward payment in advance of the date provided by Section 766 of the Taxes Consolidation Act, 1997.
To enable payment of the excess tax credits. A CT1 form for the company’s accounting period ending in 2019 must, at the time of the request, be submitted.
This is one measure of a number measures that were announced by the Irish Government to support businesses through the Covid-19 Pandemic.
Other measures include the Temporary Wage Subsidy Scheme, through which the Government is co-financing the cost of retaining employees. Concessionary loans for affected businesses, tax exemptions for imported medical supplies and PPE. Also, a soft-touch approach to tax enforcement for the period of the emergency.