Revenue's R&D Tax Credit guidance as recently Updated and how it affects your company.
August 27, 2015
Revenue has published an updated version of their Research & Development Tax Credit Guidance which would appear to represent the most significant change in administration of the R&D regime since it was introduced in 2004.
These new guidelines include a number of very significant changes, which will, in our view, have a negative impact on many taxpayers’ R&D tax credit claims. The guidance is not legally binding, but is obviously indicative of Revenue’s position on these matters.
Summary of Changes:
The main changes from Revenue’s prior guidance are in the following areas:
- Qualifying employment costs, including a reasonableness test for proprietary directors
- The treatment of certain overhead costs
- Qualifying and non-qualifying activity within software development, including guidance for agile development methodologies
- The use of individual consultants on a part time basis
- Materials used for R&D activities and subsequently sold
- R&D carried on as part of an existing trade
- Capital expenditure on buildings
- Transfer of R&D credits intra-group
- Change in ownership implications on a group’s base year
- Records to be maintained
In addition to the above, the advanced opinion mechanism contained in Revenue’s previous R&D guidelines have now been removed.
Impact on Claims:
Whilst these Guidelines represent Revenue’s interpretation of the R&D tax legislation, it is worth noting there has been no legislation amendment. Nonetheless these changes may impact on how companies carrying on qualifying R&D activities to appraise themselves of these changes and consider how these Guidelines may impact on their R&D claims.
How Shanahan's can help:
The key to unlocking your R&D tax benefits is an in-depth understanding of:
- the scientific and technological issues involved in your business
- the business processes in your organisation
- the tax rules and guidance on the meaning of R&D for tax purposes and how this applies to your industry sector
- the ability to identify and capture all eligible R&D activities throughout your organisation
An eligible claim requires a well structured approach, which identifies eligible activities, quantifies eligible expenditure, and is substantiated through robust supporting documentation.
We have first hand experience with our highly specialised teams focusing on R&D tax claims.
We have helped our clients evaluate, document and successfully complete R&D claims generating significant benefits.
We have liaised regularly with tax authorities on successfully agreeing R&D claims and have developed strong working relationships.
A Five part R&D Assessment Process
A simple test to help determine if you are carrying out a qualified R&D activity:
- Does the company undertake activity intended to develop a new or improved product or process for themselves or their customer?
- Do they create a product, process, technique, formula or invention to improve performance, functionality, reliability or cost?
- Is this activity technical in nature?
- Does this activity seek to eliminate technical uncertainty?
- Does this activity follow a process of experimentation?
Dozens of industries qualify, including:
• Engineering Services
• Job Shops (metal fabrication, gears, coatings, HVAC, recycling, etc.)
• Medical Devices
• Tool & Die... and many more
Less than a third of companies that qualify for Revenue's Research and Development Tax Credit actually utilize it, due to misconceptions about qualification and the complexity of necessary documentation. Companies of all sizes qualify for the credit and can benefit significantly.
There has never been a better time to consider an R&D Tax Credit
We would be delighted to meet with you to explore how these new Guidelines may impact your business.
See Revenue R&D Credit Guidance Links
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