R&D tax credit: 35% back on research spending, with up to €87,500 paid in the first year

What it pays

The credit is a percentage of what the company spends on qualifying research and development. It is worked out separately from the normal deduction the company takes for that spending when its taxable profits are calculated.

Revenue's own examples show how it works. A company that spends €500,000 on qualifying research in the year to 31 December 2026 gets a credit of €175,000. The same spending in 2025 gave €150,000.

The credit comes in three yearly instalments. A company with a credit of €80,000 for 2026 gets all of it in the first instalment. A company with a credit of €150,000 gets €87,500 first, €37,500 a year later and €25,000 the year after.

For each instalment the company chooses whether Revenue pays it out or sets it against the company's tax bills.

Who qualifies

The claimant must be a company within the charge to Irish tax. The research must be done in the European Economic Area or the United Kingdom, and the spending must not qualify for a tax deduction in another country.

Sole traders and partnerships are shut out. If research is a big part of the business, that is one thing to weigh when you look at the choice between staying a sole trader and forming a company.

The work itself has to pass every one of these tests:

• it is systematic, investigative or experimental
• it is in a field of science or technology: natural sciences, engineering and technology, medical sciences or agricultural sciences
• it is basic research, applied research or experimental development
• it seeks a scientific or technological advance
• it involves resolving a scientific or technological uncertainty

The advance has to be in the overall knowledge in the field, not just something new to your company. The project does not have to succeed, and the company does not have to own the resulting intellectual property.

What does not count

Revenue's manual is blunt about work that uses technology without advancing it. None of these qualify:

• research in the social sciences, including economics and business management, or in the arts and humanities
• routine testing and quality control
• cosmetic or stylistic changes to a product
• market research, market testing and sales promotion
• fixing breakdowns in normal production
• legal and administrative work on patents
• efficiency drives such as Lean projects

Software is a common trap. Revenue says that building software with known methods and the standard features of existing tools would not typically qualify, and that much software development is not research and development. Designing a new product is not enough on its own either.

Which costs you can claim

The spending must be incurred wholly and exclusively in carrying on the research.

• Staff. Pay, pension contributions, bonuses and health insurance, in proportion to the time each person spends on the research.
• Direct overheads. Power used in the research, for example. Cloud computing costs count to the extent they are used for it.
• Not allowed. Recruitment fees, insurance, travel, repairs, phone bills, bank charges and interest. Rent on an ordinary office is unlikely to count.
• Work you pay others to do. A payment to a university, or to an unconnected subcontractor, is allowed up to 15% of the company's own research spending or €100,000, whichever is greater, and never more than the company spends itself. You must tell the subcontractor in writing that it cannot claim for the same work.
• Grants come off first. Spending met by a State or EU grant does not qualify. If you spend €500,000 and get a €70,000 grant, the credit is worked out on €430,000.

Research done before the company starts trading can be claimed too. The credit is paid in three instalments from the first accounting period in which the company trades.

Grants and the credit can sit side by side on different costs. For a small company the usual grant routes are the voucher that pays a college or public research body to work on your problem and the supports Enterprise Ireland keeps for exporting firms.

How to claim, step by step

1. Keep records from the first day of the project. Revenue expects dated documents showing the original technical goal, the uncertainty, the work done, who did it and how their time was counted.
2. If the company has never claimed, or has not claimed in the last three accounting periods, send Revenue a pre-filing notification at least 90 days before the claim. It goes through MyEnquiries in ROS, under Corporation Tax, R&D Pre-filing Notification.
3. Make the claim on the company's corporation tax return, the CT1, through ROS. It must be in within 12 months of the end of the accounting period.
4. On the same return, say whether the first instalment is to be paid out or set against tax.
5. Claim the second and third instalments on the returns for the next two accounting periods.

What goes wrong

• No records made at the time. Revenue says a failure to keep them may see the claim disallowed. If only one project lacks records, only that part is refused.
• Claiming ordinary product development. New to your company is not the test.
• Missing the 12 months. A late claim cannot be made.
• Skipping the 90-day notice when it is the company's first claim.
• Claiming costs a grant has already paid for.

There is one piece of comfort for small firms. Where a micro or small company has an approved research and development grant from Enterprise Ireland or the IDA for the project, the work is in a listed field of science or technology, and the credit claimed for the year is €50,000 or less, Revenue says it will not, as a rule, challenge whether the work is real research. It can still check the figures.

A new company should also look at the separate corporation tax relief for newly formed companies.

Common questions