As a technology company in Ireland you may be eligible to claim up to 25% of your R&D costs as a tax credit. Up to 2008 this credit could only be claimed against corporation tax that was due which meant for most startups it lay unclaimed or could only be accrued against (hopefully) future profits. The full details are outlined in a Revenue note, Revenue Guidelines for Research and Development Tax Credit.
However the rules have changed for tax credits claimed in 2009. From 2009 tax credits can be reclaimed in cash where the company is not paying corporation tax (i.e. because it has no profits).
The claim is made on the standard company tax filing form CT1. You cannot claim for money that has been granted by the state (e.g. EI) or county enterprise boards. Once the claims is made and is successful you are granted the rebate in tranches over several years so you won’t get it all at once. However it can be recognised on your balance sheet.
The definition of R&D that revenue applies is stricter than that of EI, specifically,
The Act requires research and development activities to be systematic, investigative or experimental in nature. It is expected that activities be to a planned logical sequence, generally to a recognised methodology, with detailed records being maintained.
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Each project should be documented showing clearly why each major element is required, and how it fits into the research activity as a whole. To build on the results of testing in a systematic way requires the organised documentation of work undertaken by way of experimentation or investigation.
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It is important for a company to maintain dated documents of the original scientific or technological goals of the activity, the progress of the work and how it has been carried out, and the conclusions.
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Indicators or measures to be used to determine if the scientific or technological objectives of the research and development activity are met should be identified when forming the concepts for the research and development activity. These measures should also be documented at the early stages of the program. Failure to have such documentation may indicate the absence of a systematic, investigative or experimental approach.
The following are indicative of the existence of a systematic process:the work is carried out or led by trained or experienced personnel;
the work is conducted under a development protocol or under the direction of a project manager;
the work is documented;
the process by which the work is performed is documented.
So make sure you make your claim for 2008 and 2009. 2008 is accrued and 2009 will be paid in cash if you qualify.
