Early payment of 2020 R&D tax credits

Revenue recently announced a number of measures to combat the effect of the COVID-19 crisis on businesses in Ireland. One such measure includes speeding up payment of the research and development (R&D) credit which could free up thousands of euro for businesses struggling during the crisis.

Normal rules

The credit currently operates by giving businesses up to 25% of their R&D expenditure in a tax credit or in cash, subject to certain conditions being met. The 25% credit is available in addition to the 12.5% corporation tax deduction at the standard rate.

The relief is generally available for R&D activities carried out in a wide variety of science and technology areas such as software development, engineering, food and beverage production, medical devices, pharmaceuticals, financial services, agriculture and horticulture.

Where a company does not have a tax liability in the current or immediate prior period, it can claim a repayment in cash of R&D tax credits in three equal installments over a three-year cycle.
Based on normal rules, Revenue is only required to pay any cash refund after the date by which a company’s corporation tax return must be filed. Where a company’s year-end is December, the cash refund would not be repayable to the company before 23 September – the date by which a company’s corporation tax return must be filed.

New Measures

Under the new measures introduced, Revenue is allowing companies to avail of their R&D cash installments earlier than the September date.

For example:
Company X tax return for year end 31 December 2019 is due to be filed on or before 23 September 2020. The company files the return early in April 2020 with an excess R&D refund due of €199,750 – made up of R&D credits from the last three years (the 3rd installment that was due from 2017, the 2nd installment due from 2018 and the 1st installment from 2019). Following the introduction of the new measures, Revenue will now process the refund due of €199,750 immediately following filing, subject to Revenue checks, instead of waiting until after 23 September 2020.

	FY 31 Dec 2019	FY 31 Dec 2018	FY 31 Dec 2017
R&D Credit Claim	€250,000	€200,000	€150,000
1st installment due	€82,500	€66,000	€49,500
2nd installment due	€82,750	€67,000	€50,250
3rd installment due	€82,750	€67,000	€50,250

Total 2020 Payment	€199,750

This measure should assist businesses with vital cash flow during these uncertain times.

Where R&D refunds are outstanding for previous periods, this could also be an opportunity to engage with Revenue to expedite these refunds too given the current economic climate.

Application

In order to accelerate the repayments of any 2020 R&D tax credit installments, the company must:

Make a request to expedite the excess R&D tax installments through MyEnquiries.
Have filed the Form CT1 (corporation tax return) for the accounting period ending in 2019 at the time of request.

To ensure timely processing of requests, they should be tagged appropriately within MyEnquiries: