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SciMet R&D in the Sunday Business Post, 18th January 2015

SciMet R&D had an article in yesterday's Sunday Business Post to make readers aware that the new R&D Tax Credit guidelines were published last week. Given it is that time of year, we also took the opportunity to highlight a few "resolutions" to help keep R&D Tax Credits "healthy" in 2015.

There was one piece of "journalistic licence" applied to our article that we think is worth clarifying. In the Experimental Development paragraph, it is stated that experimental development can be difficult to identify due to its "similarity" to non-qualifying activities.  In our article we had highlighted that it is the "proximity" of experimental development to other activities, i.e. in the NPD cycle, that presented challenges. Experimental Development is of course not similar to  non-qualifying activities as evidenced by the large number of successful claims made for these type activities. Not too sure why they changed it prior to publishing but there you go!

Download the full Pdf version of the article here



New R&D Tax Credit Guidelines published by the Revenue Commissioners today, 14th January 2015


The updated Research and Development Tax Credit Guidelines were published by the Revenue Commissioners today, the 14th January. The updated guidelines can be accessed on the Revenue website at They contain additional guidance on certain key areas and some useful worked examples. Below we highlight some of the main changes from previous versions of the guidelines.

Payable Credits (Section 2.4)

A number of worked examples are provided showing how the payable tax credits are computed and in particular, the restrictions to the amounts receivable as cash (see examples 7 and 8)

Order of Offsets (Section 2.8)

Previous versions of the guidelines did not deal with the order of offset where a company has a current year tax credit, a carry forward of payable tax credits from the post 2009 period and a carry forward of non-payable tax credits from pre-2009. Example 11 shows that after the current year tax credit has been used, the pre-2009 non-payable tax credit can then be used in priority to the payable tax credits carried forward.

Software (section 3.7)

Additional guidance is provided for R&D Tax Credit claims made in the software sector. This includes:

  • An emphasis on the importance being able to identify not only those developments that result from qualifying activity but also the software development life-cycle phases that qualify.
  • Recognition that agile development methodologies are systematic in nature (one of the requirements for activities to qualify for the tax credit).
  • Examples of technological uncertainties (another of the requirements for activities to qualify for the tax credit) that may arise during the development life-cycle.
  • Examples of features in the development life-cycle that in Revenue’s view do not constitute qualifying R&D activity.
  • The importance of distinguishing between qualifying and non-qualifying activities, that may be taking place simultaneously in agile development methodologies, is highlighted.

Employee Staff Costs (section 4.2)

Revenue provide guidance on the emoluments to be included when calculating the R&D staff costs. They state that “pension contributions, bonus payments, health insurance or other items included in the reward package paid to R&D employees” may be included. In Note 18 to the guidelines, Revenue advise that where payments made to proprietary directors (or other persons with control over their emoluments) are significantly out of step with normal emolument practice of the company, these payments will generally not be regarded as eligible expenditure.

Revenue state that it is their view that as emoluments also include holiday entitlement, public holidays etc. the cost of employment for a full time employee should be spread over 52 weeks (pro-rated for a part-time employee).

Revenue also state that it is their view that overhead costs associated with the employment of an individual, such as HR costs, payroll team costs, canteen costs are not considered eligible as they are incurred “in connection with” as opposed to “in the carrying on by it” of the activity”.

Agency Staff (section 4.3)

Revenue confirm that the use of agency staff is an outsourcing of R&D activities and therefore the related payments should be subject to the restrictions that apply to these payments (i.e. the greater of €100,000 or 15% of in-house R&D expenditure).

Individual Consultants (section 4.3.1)

The updated guidelines set out the conditions that must be met for costs relating to individual consultants hired on a part-time/short time basis to be treated as direct employee costs (no restriction) as opposed to outsourced costs (restricted).

Materials used in R&D Activities which may be subsequently sold (section 4.6)

In the guidelines Revenue recognise that materials used for R&D may have a commercial value after the R&D has concluded. They advise the expenditure to be included in the claim in relation to such material should be reduced by the lower of a) the cost of the materials or b) the net realisable value of any materials or other saleable product which remains after the R&D activity.

R&D carried on as part of an Existing Trade (section 4.7)

Revenue state that where R&D is being carried on as part of the trade activities of a company, the eligible expenditure is limited to the additional expenditure that is incurred wholly and exclusively in carrying on the R&D. They give an example of a situation where R&D is being undertaken on a live production line while saleable product continues to be produced. They advise that it is the increase in unsaleable product and additional time costs that can be shown to have been incurred in the carrying on of the qualifying R&D that may be eligible.

Buildings and Structures used for R&D (section 5.1)

Revenue confirm that where expenditure on the construction of a building is incurred over two or more accounting periods, the aggregate expenditure is treated as incurred from the date the building is brought into use. The 12 month time limit for making a claim under S766A applies by reference to the date that the expenditure is treated as incurred.

Plant and Machinery (section 5.3)

The updated guidelines confirm that expenditure on plant and machinery (“P&M”) may be treated as incurred either on a) the date the P&M is brought into use and b) the date the expenditure becomes payable. Option b) can only be used where the P&M is brought into use within two years. This option was originally provided in Tax Briefing No. 59 from 2005.

Changes to Group Structure (section 7.7)

As provided in last year’s e-brief, Revenue confirm that where a company is disposed of by one group and acquired by another, any base year R&D expenditure of the company remains with the old group and does not pass to the new group. They state that this is not the case where there is common control of the two groups.

The Science Test (section 8.1)

The updated guidelines confirm that the company’s supporting documentation should evidence that the scientific/technological advancements had not previously been achieved and that the scientific/technological uncertainties had not previously been resolved (or if resolved, that the resolution was not available to a competent professsional working in the field) prior to the company commencing its project. Evidence that a comprehensive literature review was conducted prior to commencing the project is given as an example of the type of records to be retained.

Budget 2015 – R&D Tax Credit and other innovation measures



Key “Innovation” Measures Announced


1: R&D Tax Credit Base Year Restriction to be removed from 1 January 2015


2. New R&D Tax Credit Guidelines to provide enhanced clarity


3. Knowledge Development Box to be introduced (in line with patent box in other countries)


4. Increase in capital allowances available for Specified Intangible Assets



Earlier today, Minister Noonan delivered his Budget 2015 speech in which he announced a range of measures to be introduced as part of the Government’s Road Map for Ireland’s Tax Competitiveness. Below we highlight a number of these measures that will be of interest to innovative Irish companies.


R&D Tax Credit Base Year Restriction to be removed from 1 January 2015


It was confirmed that the base year restriction will be fully removed from 2015 thereby completing the transformation of the tax credit from an incremental to a volume-based scheme.


This change is to be welcomed and not only because it increases the tax credit available to some companies. As we have moved further from the 2003 base year, the requirement to identify and support the level of R&D activities and related expenditure in 2003 has proven increasingly problematic for many companies. This move to a volume-based scheme should therefore reduce the administrative burden for companies going forward.


New R&D Tax Credit Guidelines to be published


It was also confirmed that the Revenue Commissioners plan to publish new guidelines that will “enhance clarity on the administration of the R&D Tax Credit”.


The urgent need for improved clarity, certainty and consistency in the administration of the tax credit featured prominently in the SciMet R&D pre-budget submission (see and therefore we welcome this announcement. However, we would question the delay in issuing these new guidelines. The deficiency in formal guidance is something SciMet R&D’s managing director, Eoin Brennan, has been highlighting for a long time. During the review of the R&D Tax Credit carried out by the Department of Finance last year this issue was consistently raised by stakeholders as requiring attention. It is unfortunate that no date was provided by Minister Noonan for the publication of the new guidelines. We would urge the Revenue Commissioners to issue them without further delay.


Knowledge Development Box to be introduced


Minister Noonan’s announcement that he is to launch a public consultation process with the view to introducing a “best in class” Knowledge Development Box is positive news for innovative Irish companies. While full details of the scheme are not yet known, Minister Noonan did confirm that it will operate along the lines of the patent and innovation box regimes in place in other jurisdictions and will deliver a “low, competitive and sustainable tax rate”.


Increase in Capital Allowances available for Specified Intangible Assets


S291A Taxes Consolidation Act 1997 provides for capital allowances to be available to companies in respect of expenditure incurred on certain intangible assets including patents, trade-marks and secret processes/formulae among others. Currently, the maximum capital allowances available are restricted to 80% of the trading income from the relevant trade in which the intangible assets are used. Minister Noonan announced today that this 80% restriction is to be removed.


Revenue eBrief No. 89/14 - Does Revenue clarification regarding Threshold Amount provide the clarity required?


On 3rd October 2014, Revenue issued eBrief No. 89/14, titled “R&D – Clarification of the treatment of threshold expenditure in certain circumstances”. In it, Revenue confirm that “Practitioners have sought clarification of the treatment of the threshold amount in circumstances where a company is disposed of by one group and acquired by another after the threshold period". Revenue “clarify” that in such circumstances, the "threshold amount is the amount of R&D expenditure by the actual group during the threshold period. This threshold period for the continuing group does not change as a consequence of either the subsequent acquisition or disposal of a company by that group". The full eBrief can be accessed here:


At SciMet R&D, we welcome the move by Revenue to bring clarity to this important issue. R&D Tax Credits are prepared on a group basis and “qualifying group expenditure” includes an amount calculated with reference to the excess of group expenditure on R&D in the relevant period over the threshold amount. Therefore, whether the threshold amount of an acquired company passes with it to its new group can have a significant impact on the claims of both groups and indeed can have implications that extend beyond the R&D Tax Credit e.g. the company’s valuation.


Based on the wording of eBrief No. 89/14, it appears clear that where a company (“R&D Co”) is sold by one group (“Group A”) to another, unrelated group (“Group B”) after 2003, the threshold amount of neither group is impacted by the disposal/acquisition i.e. R&D Co’s threshold amount remains with Group A.


However, in our view, the application of the eBrief to other circumstances should be clarified further. Take for example, the situation described below which can occur in any industry sector but would be particularly relevant to high-tech, R&D intensive sectors such as the ICT and Life Science sectors:


SME Co is an owner managed company. It has never previously been part of a larger group. The company undertook R&D activities in 2003 and subsequent years. In 2014, the shareholders of SME Co received and accepted an offer from an unrelated group (“Group C”) to purchase 100% of their shares in SME Co. Does SME Co’s threshold amount pass to Group C?


Obviously, despite not being part of group until 2014, SME Co was entitled to claim R&D Tax Credits under S766 TCA for previous years. S766 (1)(b)(iii) TCA 1997 explicitly states that “a company which is not a member of a group shall be treated as if it were a member of a group which consists of that company”. This subsection has the effect of extending the provisions of S766 (which are written with reference to groups) to companies that are not members of a group.


However, in our view, it is unclear from eBrief No. 89/14 whether Revenue’s intention is that the clarification would apply so that Group C’s threshold amount would be unaffected by its acquisition of SME Co. The line in the eBrief “This threshold amount for the continuing group does not change as a consequence of either the subsequent acquisition or disposal of a company by that group…” would indicate that this is the case. However, if the line is qualified by a requirement that SME Co be "disposed of by one group and acquired by another", it becomes less clear.


A lot of good work has already gone into preparing eBrief No. 89/14. To ensure it is successful in providing the clarity and certainty that companies require on this important issue, it is crucial that all ambiguity be removed. Therefore, we would recommend that Revenue issue a more comprehensive clarification that explicitly deals with the finite number of situations commonly encountered such as that outlined above.

WE ARE HIRING! Opportunity for ambitious scientist/engineer to join market leading R&D Tax Credit team


SciMet R&D is the leading, Irish owned, independent R&D Tax Credit consultancy company. The company was founded on a simple principle – to consistently deliver exceptional service and value to R&D performing companies in claiming their full and proper R&D Tax Credit entitlement. We achieve this by delivering the perfect blend of science, technology, tax and accounting expertise. The R&D Tax Credit is unique in that it combines a science test with an accounting test. SciMet R&D is unique in the Irish market in the value we bring to our clients in meeting both tests.

 Due to the continued growth and success of our business, an opportunity has arisen for an ambitious scientist/engineer to join our team. We are seeking candidates that share our passion for science, technology and innovation and are interested in applying and developing their knowledge and capabilities in the exciting field of R&D Tax Credits.

The right candidate will have the opportunity to work within our multi-disciplinary R&D Tax Credit team in delivering market leading, bespoke R&D Tax Credit solutions to innovative Irish companies. You will receive extensive training on the R&D Tax Credit and be fully supported in establishing yourself as an expert in this niche area.

As a Scientific Consultant within our team, your duties and responsibilities will include the following:

  • Investigation of projects undertaken by clients to assist in identifying those that meet the definition of R&D activities for tax credit purposes;
  • Preparation of R&D Tax Credit Report setting out the basis to the claim from a science and tax perspective;
  • Preparation of R&D Tax Credit computation;
  • Support of claims in the event of a Revenue audit/enquiry


Experience and skills required

  • Qualified scientist/engineer with a background in one or more of the following: Biotechnology/Biochemistry, Electrical/Electronics Engineering, Computer Science, Food Science, CleanTech.
  • Passionate about science, technology and innovation;
  • Excellent communication, both spoken and written;
  • A team player with the ability to work on own initiative;
  • The ability to work to tight deadlines.


If you are interested in this role please e-mail a copy of your CV to Eoin Brennan at This email address is being protected from spambots. You need JavaScript enabled to view it.

About Us

SciMet R&D is the leading, Irish owned, independent R&D Tax Credit consultancy. The company was founded on a simple principle – to consistently deliver exceptional service and value to R&D performing companies in claiming their full and proper R&D Tax Credit entitlement.

We achieve this by delivering the perfect blend of science, technology, tax and accounting expertise. The R&D Tax Credit is unique in that it combines a science test with an accounting test. SciMet R&D is unique in the Irish market in the value we bring to our clients in meeting both tests.

At SciMet R&D we are truly passionate about science and technology. It motivates us to be able to play a part in the exciting research and development being carried out by our clients.  Our tailor-made R&D Tax Credit services deliver efficiencies, robustness and cost effectiveness that facilitate our clients in doing what they do best – innovate.

Our Address: Unit 3, Cova, Trafalgar Road, Greystones, Co. Wicklow