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Invennt Director & Co Founder Brendan Morahan write about the services that they provide to assist companies in determining their eligibility for R&D tax credits
Many column inches have been devoted to the recently announced package of reforms to the National Development Plan and the moratorium on Development Levies but is the industry overlooking government support available in the here and now?
The recent announcements from Leinster House have received a warm welcome by the industry and deservedly so, but many contractors remain oblivious to government support that has been available for years, namely Research and Development (R&D) tax credits. The often-overlooked incentive provides tax-relief for businesses that overcome complex technical challenges, but despite construction being fertile ground for exactly the types of activities that qualify, many businesses aren’t claiming the relief they’re entitled to.
The scheme was introduced by the Irish government in 2004, to incentivise investment in innovation by deducting up to 25% of the money spent to overcome technical uncertainty from their corporation tax liability. The credit can be used to reduce current or future tax liabilities, and in some cases, firms can even choose to have the credit refunded as a cash payment.
Despite the significant financial upside and widespread eligibility, many businesses in the sector aren’t claiming. There are a few factors that explain this and the first is the humility that characterises the industry. Only recently I spoke to a groundworks contractor that had developed a pioneering piling solution to provide structural stability in conditions that would give most geotechnical engineers nightmares, yet they still described their business as “digging holes and driving piles.”
This down-to-earth attitude when confronted with a nebulous term like “R&D” leads executives to draw all the wrong conclusions. However, on closer inspection of the tax code it soon becomes apparent that contractors undertake the problem-solving activity the scheme is designed to incentivise.
The second reason many aren’t claiming is that it sounds too good to be true. Cynics question why the government would willingly eat into one of its sources of revenue by offering generous tax relief but the reality is that corporation tax only makes up a small proportion of tax receipts. The government receive approximately two thirds of its revenue from income tax and VAT, so the logic behind R&D tax credits is that businesses will grow and employ more staff, ultimately leading to a higher tax take for the Revenue.
Lastly, many businesses attempt to claim themselves but have difficulty reconciling the language used in the tax code with the terminology used in construction, meaning many decide that it’s more trouble than it’s worth, miss qualifying expenditure or submit ineligible costs, which is why most successful claimants use a specialist to quantify and formulate their claim. Our skill is in asking searching questions, based on our sector knowledge and experience, to categorise qualifying activities that often get missed. We take a small fee to manage the process, but it is insignificant when compared to the hassle-free injection of capital our clients receive.
While the National Development Plan and the moratorium on Development Levies have received substantial coverage, it’s important not to overlook the hidden gem that is R&D tax credits. The scheme has the potential to inject working capital back into the sector, catalyse innovation, drive technological progress, and help Irish construction maintain its world-leading reputation.
We welcome the announcements from Leinster House but when unlocking the sector’s full potential and ensuring a prosperous future for Irish construction, a bird in the hand really is worth two in the bush.
Contact Brendan on +353 (1) 5710699 or [email protected] to book a complimentary exploratory review to determine your eligibility for R&D tax credits and find out how much you could claim.
Brendan Morahan, Director and co-founder