Claim R&D tax credits early, advises Deloitte

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Recent Revenue changes allow early availability for qualifying organisations

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12 May 2020 | 0

Revenue has made changes to the research and development tax credit that could be of immediate benefit to qualifying organisations, according to Deloitte.

Andrew O’Reilly, senior manager, Tax, Deloitte, said that recent announcements by Revenue with regard to the 25% research and development tax credit, could mean that companies that complete the claim early can realise the benefit sooner than the legislation has historically allowed.

Due to the current pandemic and its implications for business, said O’Reilly, Revenue has stated, “In the exceptional circumstances of the Covid-19 pandemic and subject to appropriate checks in selected cases, Revenue will expedite the payment of any instalment of excess R&D tax credit that is due to be paid in 2020, bringing forward payment in advance of the date provided by Section 766.”

 

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The above relates to cash payments due on R&D tax credit claims to claimant companies that are not in a corporation tax paying position, e.g. carrying losses, O’Reilly advises, which means the need to complete R&D tax credit claims and Corporation tax returns as early as possible is more important than ever.

“These are uncertain, unprecedented times for businesses operating all over the world. Of course, the primary focus of business leaders is currently the health and vitality of staff and their families as well as the maintenance and ongoing success of the business. However, all business leaders are also thinking about what instruments or mechanisms are available for cost saving or minimisation,” said O’Reilly.

“There is an immediate positive impact for R&D performing businesses who can avail of this new measure. On top of this, and perhaps more importantly, additional benefits and efficiencies are achieved by preparing R&D tax credit claims earlier in the year, if not in real time. When coupled with this announcement from Revenue, there has never been a better time to implement the change necessary to have claims completed earlier in the year.”

O’Reilly listed a number of reasons for organisations to move on this facility now.

  • Retrospective claims are more difficult to administer, period. Retrieving information on previously undertaken technical activities can be time consuming and difficult. Adding to this is the human element, i.e. scientific and technical staff having to look back at old activities that are very much not a part of their current day-to-day thinking, can be burdensome and perceived as non-essential.
  • Real time (or near real time) claims have at their core better systems and controls for the management and measurement of R&D activities and associated costs. Real time means good governance and better due diligence, underpinned by a clear methodology.
  • Where claimants are in receipt of Research Development and Innovation (RD&I) grants or are in a position to avail of Knowledge Development Box (KDB), then the documentation for all of these benefits can evolve throughout the RD&I life cycle. That is to say, grant application information can be utilised for R&D tax credit claims and further still for KDB.
  • Submitting the claim as part of your corporation tax return ensures at least the possibility of receiving payment earlier. Clearly, right now this is of paramount importance to claimant companies and should be the goal of each R&D performing entity.

“So, to gain access to cash reserves caught up in outstanding R&D tax credit payments and to better future proof your claims process, these are the things to start thinking about now!” O’Reilly concludes.

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