To support Irish businesses' cash flow, the Irish Revenue has said it will bring forward the payment of instalments of excess research and development tax credit for businesses that are due a payment this year.
Ireland's research and development tax credit allows companies to reduce their corporate tax liability by 25% of qualifying expenditure.
To qualify for the research and development tax credit, activities must satisfy all of the following conditions.
- be systematic, investigative or experimental activities;
- be in a field of science or technology;
- involve one or more of the following categories of R&D:
- basic research,
- applied research, or
- experimental development.
In addition, they must:
- seek to achieve scientific or technological advancement; and
- involve the resolution of scientific or technological uncertainty.
Claiming the Credit
The credit is initially used to reduce the liability to Corporation Tax (CT) for that accounting period.
Where a company has insufficient corporation tax liability against which to claim the research and development tax credit in an accounting period, the tax credit may be credited against the corporation tax for the prior period.
If 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. The most recent announcement from Revenue concerns these claims for payment of the credit.
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R&D Credit Instalment Payments
Where 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 instalments over a period of 33 months.
Revenue has announced that, in the exceptional circumstances of the COVID-19 pandemic, and subject to appropriate checks in selected cases, Revenue will expedite the payment of any instalment of excess R&D tax credit that is due to be paid in 2020, bringing forward payment in advance of the date provided by Section 766 of the Taxes Consolidation Act, 1997.
To enable payment of the excess credits, the form CT1 for the company's accounting period ending in 2019 must, at the time of the request, be submitted.
The measure is just one of a number that has been announced by the Irish Government to support businesses through the COVID-19 epidemic.
These include the Temporary Wage Subsidy Scheme, through which the Government is co-financing the cost of retaining employees. Other measures include concessionary loans for affected businesses, tax exemptions for imported medical supplies and personal protective equipment, and a soft-touch approach to tax enforcement for the period of the emergency.