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The R&D Tax Credit has become one of Ireland’s most important innovation incentives, supporting companies undertaking research and development activities to resolve scientific and technological uncertainties.
While often associated with technology and pharmaceutical companies, many of the most challenging R&D activities take place within the construction, engineering, utilities and infrastructure sectors, where businesses are continually developing new methodologies, materials, systems and processes to overcome complex technical challenges.
The enhancements announced as part of Budget 2027 recognise how innovation is delivered in practice and should provide additional support to companies undertaking genuine R&D activities.
Increased support for collaborative and subcontracted R&D
One of the most significant changes for construction and engineering businesses is the increase in the subcontracted R&D limits from 15% to 20%, alongside an increase in the monetary cap from €100,000 to €200,000.
Innovation in these sectors frequently relies on specialist expertise. Whether engaging external engineering consultants, universities, testing laboratories, environmental specialists, materials experts or other technical service providers, businesses often need access to knowledge and capabilities beyond their own organisation to overcome technological uncertainties.
The enhanced limits recognise the importance of collaboration and should provide greater flexibility for companies carrying out complex R&D projects while maintaining a strong in-house innovation capability.
Recognition of wider innovation costs
Another notable enhancement is the introduction of a new provision allowing claimant companies to increase their qualifying R&D cost base by 5% of qualifying R&D costs.
The rationale behind this measure is that innovative businesses incur a range of supporting costs while undertaking R&D activities, many of which do not currently fall within the definition of qualifying expenditure.
For construction and engineering businesses, where innovation often requires significant supporting activities alongside core development work, this represents a welcome acknowledgement of the broader costs associated with developing, testing and implementing new solutions.
While further legislative detail and Revenue guidance will be required to fully understand how this measure will operate in practice, the direction of travel is clearly positive for R&D-active businesses.
Enhanced cashflow benefits
Budget 2027 also includes measures aimed at accelerating the financial benefits associated with R&D investment.
The increase in the first-year payment threshold from €87,500 to €105,000 means that a greater proportion of smaller and medium-sized claims can be accessed sooner, rather than being spread across the standard repayment profile.
In addition, changes have been announced to improve the recognition of the R&D tax credit for preliminary corporation tax purposes, providing an additional cashflow benefit for companies investing in innovation.
Together, these measures should help businesses realise the value of their R&D investment more quickly and support continued innovation activity.
Looking ahead
At Invennt, we regularly work with construction, engineering and infrastructure businesses that are solving genuine scientific and technological challenges through systematic development, testing and experimentation.
From advanced water and wastewater treatment technologies to complex engineering solutions, innovative construction methodologies and bespoke infrastructure systems, R&D is taking place across Ireland’s built environment and industrial sectors every day.
The Budget 2027 enhancements are a positive step in recognising the realities of modern innovation and providing additional support to companies investing in technical advancement.
Innovation doesn’t only happen in laboratories. Some of the most significant breakthroughs occur on construction sites, in design offices, manufacturing facilities and engineering workshops across Ireland. Budget 2027 further strengthens the support available to businesses driving that innovation.