R&D tax credit - Limit on amount of payable credits

Where an R&D tax credit has been set against against the Corporation Tax (CT) liability of the accounting period to which the credit relates, and against the CT liability of the preceding accounting period, any excess unutilised amount remaining can be claimed as a payable credit.

Limit on amounts of payable credits

The amount of the credit allowable as a payable amount is restricted to the greater of:

1. the total CT paid by the company over the preceding 10 year period less any payable credits claimed in those periods; or
2. the payroll tax liabilities payable for the period in question and the preceding period reduced by the lesser of:

•  
  • the excess of payable credits, if any, over all payroll tax liabilities for all previous periods a payable credit was claimed; or
  • the payroll liabilities in the preceding period.

* Payroll tax liabilities includes PAYE, USC & PRSI).

Warehoused payroll tax liabilities

The challenges presented by the COVID-19 pandemic has seen many companies utilising Revenue’s debt warehousing facility in respect of payroll tax liabilities, for which they will be obliged to pay in due course.

Revenue have communicated to us that where a company has utilised the debt warehousing facility and some payroll taxes for the accounting period remain unpaid, this will not prohibit the company from claiming payable R&D tax credits.

This is the current position communicated by Revenue and while it is a positive update, it is expected that  Revenue may not, in certain circumstances, adopt this position if they deem that they are unlikely to ultimately have the warehoused payroll tax liabilities or other warehoused tax debts repaid.

If you have any questions in relation to the above, or if you would like to discuss this topic further, please contact a member of the Mazars corporate tax team below:

Published: February 2021