Recent updates to R&D corporation tax credits

These changes provide enhanced flexibility and streamlined processes for companies claiming the credit.

Pre-notification requirement

From 2024 onward, companies claiming the R&D tax credit for the first time, or those who have not claimed it in the past three years, must comply with a pre-notification requirement. This measure aims to create a more organised and transparent process.

Pre-notification details

• Notification deadline: Companies must notify Revenue at least 90 days before submitting their claim.
• Required information: The notification should include:
  • Company name, address, and corporation tax number.
  • A summary of the R&D activities undertaken.
  • Details of employees involved in R&D, incurred expenses, and any external support received.
• Submission platform: Notifications should be submitted via MyEnquiries under the "R&D Pre-filing Notification" category.

This requirement helps companies streamline their R&D processes and enables Revenue to evaluate claims more efficiently. For a detailed version of the Pre-Filing Notification Form, visit the Revenue website.

Increase in R&D tax credit rate and new thresholds

To boost R&D investment, government has increased the tax credit rate and updated the first-year payment thresholds. These changes apply to accounting periods beginning on or after 1 January 2024.

Updated tax credit rate

For accounting periods beginning on or after January 1, 2024: the tax credit rate for qualifying R&D expenditure increases from 25% to 30%.

For accounting periods beginning before January 1, 2024: The previous 25% rate continues to apply.

Revised first-year payment thresholds

The first-year payment thresholds have been significantly increased:

• 2023: The first-year payment threshold was the greater of €25,000 or 50% of the total credit amount.
• 2024: The threshold increases to the greater of €50,000 or 50% of the total credit amount.
• 2025: The first-year threshold is set at the greater of €75,000 or 50% of the total credit amount.

These revisions aim to encourage smaller companies to invest more in R&D by providing larger upfront support.

Three-year instalment structure and credit utilisation

The R&D tax credit is paid in three instalments over three years. To align with global minimum tax regulations under Pillar 2, the previous prioritisation of offsetting the credit against corporation tax liabilities has been removed, giving companies greater flexibility in how they use their credits.

Utilisation options

Companies can use the credit to reduce their corporation tax liabilities or request direct payment from Revenue.

The first instalment is calculated based on the thresholds mentioned above. In subsequent years, companies can claim 3/5 of the remaining amount in the second year and the balance in the third year, choosing either a cash payment or liability reduction depending on their needs.

How Forvis Mazars can help

If you have questions about how these updates impact your business or need assistance navigating the new requirements, contact our R&D tax team today. We’re here to help you maximise the benefits of the R&D tax credit.