What the credit is worth
The R&D tax credit is a corporation tax credit of 35% of qualifying expenditure. It is separate from, and additional to, the ordinary deduction the company already takes for the same costs — so qualifying spend attracts relief twice.
Budget 2026 increased the rate from 30% to 35% and raised the first-year payment threshold from €75,000 to €87,500. The threshold matters for cash flow: it is the amount that can be paid out in full in year one rather than spread across three annual instalments.
The credit is repayable in cash. A loss-making company with no corporation tax liability still receives the money. That makes it one of the few genuinely cash-positive supports available to Irish companies doing technical development work.
What actually qualifies
This is where most claims are won or lost. Irish law sets a specific test, and it is narrower than the everyday meaning of research and development but wider than most business owners assume.
The activity must be systematic, investigative or experimental; it must be in a field of science or technology; it must fall within basic research, applied research or experimental development; and it must seek to achieve scientific or technological advancement while resolving scientific or technological uncertainty.
What does not qualify
- Market research, consumer surveys and commercial feasibility studies.
- Routine quality control and standard testing.
- Cosmetic or stylistic changes to an existing product.
- Configuring or implementing off-the-shelf software without technical development.
- Legal and administrative work associated with patents.
- Research in the social sciences, arts or humanities.
What costs you can include
| Category | Treatment |
|---|---|
| Staff costs | Salaries, employer PRSI and pension contributions, apportioned by time spent on qualifying activity |
| Materials and consumables | Items consumed or transformed in the R&D process |
| Plant and machinery | Where used for R&D, apportioned by the proportion of qualifying use |
| Outsourced to universities | Allowable up to a statutory limit of the company's own qualifying spend |
| Outsourced to unconnected third parties | Allowable up to a statutory limit, with prior notification to the subcontractor required |
| Buildings | Separate rules apply for R&D buildings, based on the proportion of R&D use |
Grant-funded expenditure has to be excluded. Where a project received an Enterprise Ireland or other state grant, the grant-aided portion cannot also attract the credit, and the interaction needs to be calculated rather than estimated.
How the money reaches you
The company claims the credit on its CT1. It is first offset against the corporation tax liability of the accounting period. Any excess is payable, and the payable element is made in three annual instalments, subject to the first-year threshold that allows smaller claims to be paid in full immediately.
- Identify qualifying projects and quantify the expenditure for the accounting period.
- Prepare contemporaneous technical and financial documentation.
- Claim on the CT1 for that period.
- Offset against corporation tax, then elect how the payable balance is treated.
- Receive the payable amount in full where it is within the first-year threshold, or in three instalments where it is above it.
The claim must be made within twelve months of the end of the accounting period in which the expenditure was incurred. This is a hard deadline. A company that identifies an eligible project thirteen months later has lost that year entirely, and this is by some distance the most common way Irish companies lose R&D credits.
Documentation, and why claims fail
Revenue can and does review R&D claims, and may appoint an independent technical expert to assess whether the activity meets the science and technology test. The review looks at what you recorded at the time, not at what you can reconstruct afterwards.
- A technical narrative for each project: the uncertainty faced, the approach taken, what was tried, what failed, what was learned.
- Contemporaneous records — design documents, test results, version histories, lab notes, commit logs.
- Timesheets or a defensible basis for apportioning staff time to qualifying activity.
- A clear financial trail from the accounting records to the figure claimed.
- Evidence of the grant interaction where any funding was received.
Why eligible companies do not claim
The pattern in Irish SMEs is consistent. Companies assume R&D means laboratories and white coats, so a software firm solving genuinely hard engineering problems, a food producer reformulating a process, or an engineering business developing a new production method never looks at it.
The second pattern is the twelve-month deadline. By the time the accounts are being prepared and somebody asks the question, the window on the earlier year has already closed.
If your business employs technical staff to solve problems that do not have a known answer, the question is worth asking every year, before the year ends.