Learnovate Lunchtime Series: Tax Incentives for Innovators

by Peter Gillis

The November Lunchtime Seminar may well go down as a missed opportunity for those who could not attend. James and Caroline from Mazars gave the members who did attend a very frank and practical view on how to approach the area of Research & Development Tax Credit. The credit certainly appears to be a valuable benefit for companies engaged in research and development, returning 25% on qualifying expenditure and the potential to realise it in cash.

Mazars pointed out that both the research and the activities that are considered viable for the credit are wider than one might think. In relation to research, the three main areas are Basic Research, Applied Research and Experimental development. In terms of activities, alongside the traditional science lab style research, software development and process engineering can qualify.

Through some very clear examples Mazars showed how the credit can amount to quite a tidy sum when you add in salaries, direct & indirect costs, capital expenditure and subcontractors (or universities!).

In terms of realizing the credit there are various options, the credit can be claimed irrespective of whether the company is in profit or not. Profitable companies can offset against current or the prior years’ Corporation Tax with excess carried forward. Loss making companies can get cash refund or hold to offset against future Corporation Tax.

There is no catch associated with this credit, but you do only have a 12 month window in which to claim your credit. The applications can be subject to interrogation by revenue and this is where Mazars can assist in terms of planning and documenting any claims.

There was a lot of interest in the follow up session, and James was asked about initiatives such as customisation, if the activity is for a third party and version development, the answer was that on a case by case basis all have potential to be open for claim, although only one company can claim for a each activity. The rule of thumb is, was there either a scientific or technical advancement? Or did the activity seek to resolve a scientific or technological uncertainty?

James can be contacted at: jhughes@mazars.ie