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In our latest guest blog, we hear from CIF Corporate Partners, Invennt, about Ireland’s R&D tax credits.
It’s often said that the devil is in the details, and nowhere is that more apparent than in Ireland’s R&D tax credit.
While the name “R&D” conjures up images of white coats and clipboards, the picture is more nuanced when one examines the substance of the policy. Ultimately, it is a tax credit available to businesses that encounter technological challenges and spend money to resolve them. It’s a curious irony, then, that construction, which arguably encounters more technical risk than any other industry, often believes that its work is not eligible for research and development tax relief.
Too many contractors, engineers and architects still think of the credit as the preserve of laboratories and big tech, when in fact the design of a new structural system, innovative ground stabilisation methods and the integration of incompatible building systems – among endless other examples – all fall squarely within its scope. In other words, the industry is already doing R&D, even if we don’t recognise it as such. In addition to the confusion caused by the name of the scheme, there are also industry-specific quirks that discourage many from availing of the relief.
On paper, it looks like a no-brainer: a 30 per cent credit on qualifying expenditure, payable even where the company has little or no corporation tax liability. Scratch beneath the surface, however, and issues begin to emerge. The Irish Tax Institute has already called for a sweeping overhaul, arguing that the regime must be modernised if Ireland is to keep pace with countries wooing the same investment, and they are right. The current system could be simpler, less bureaucratic and more transparent, but how can companies overcome the challenges that exist today and what could be changed from a policy perspective?
Prepare information for the Revenue
First, let’s consider the remittance period. At present, payments are spread over three years: half in the first year, then thirty per cent, then twenty per cent. In the meantime, businesses are expected to shoulder considerable upfront costs. For those in construction or other project-driven industries, cash flow is already stretched by the rhythm of an inconsistent pipeline of work, cyclical cash flow, lengthy payment terms, and operational volatility. Waiting two or three years to see the full benefit of the entitlement is just another barrier to uptake.
A shorter, sharper payment cycle is not only desirable, but also essential. A more pragmatic arrangement could be considered whereby smaller claims are settled in full within a year, and larger claims are dealt with in two instalments.
However, the policy itself is not solely to blame for the poor take-up of the scheme by the construction sector. A thorough understanding of how the scheme relates to construction is essential before submitting a claim. So too is the requirement to have forensic supporting documentation. Otherwise, companies run the risk of falling foul of Revenue.
Advisors like Invennt know how the rules apply to construction and how to prepare information for the Revenue, and our exploratory process and specialist expertise produce a more compelling technical narrative. We also leverage software and data science to gather evidence and quantify costs more forensically. This means that if the Revenue does investigate, there is a bank of evidence to support the claim and an accompanying report already prepared to present to the tax authorities.
Next, there is the thorny question of who and what qualifies. Too often, R&D is spoken of as though it were the preserve of the tech and pharmaceutical giants. Yet construction firms experiment with new materials, employ novel structural techniques, and develop energy-efficient building systems, all of which meet the definition of R&D. Yet the guidance is, at best, nebulous.
What is needed is not so much a wholesale redrawing of the map as a bit of signposting. Clearer guidance, illustrated with construction-specific examples, would give firms the confidence to claim without fearing a protracted battle with Revenue. There is no reason why experimental foundations, novel concrete mixes, modular prototypes or energy-saving retrofits should be excluded simply because they do not fit the mould of traditional R&D.
However, in the meantime, construction claimants can rely on Invennt, an advisor that straddles construction and tax, to interpret the rules in a way that is compliant while leaving no money on the table. By employing tax experts, who work hand in glove with engineers and architects, Invennt bridges the professional language gap that exists between finance and technical roles and produces a claim that is robust and compelling. Invennt delivers this without disrupting the day-to-day running of our clients’ businesses.
Finally, accounting for spending in construction can be difficult. Unlike a pharmaceutical lab or software studio, where expenditure is neatly accounted for in spreadsheets and time sheets, construction projects are more complicated affairs: subcontractors, materials, plant hire, and labour are moving parts on a scale that can make even the most organised project manager weep. Knowing what qualifies as R&D is difficult, but having the paperwork to prove it can feel like an impossible task.
AiRD platform
Record-keeping is a particular bugbear. Revenue expects firms to demonstrate not just spend, but the systematic, investigative work that counts as R&D. For construction, that might mean documenting trials of new materials, experimental structural methods, or energy-efficient building techniques. Yet these endeavours are often embedded in day-to-day site activity, with sketches on a clipboard, notes in the margins of a specification, or photos on a phone. Without careful collation, the story can easily get lost, and what should be a straightforward claim turns into a minefield of assumptions.
Invennt solves this challenge using our AiRD platform, which allows us to ingest huge quantities of digital project files, analyse them, make sense of them and identify where a team has encountered and resolved technological uncertainty in a novel fashion. This system enables Invennt to do the heavy lifting on our clients’ behalf, reducing the amount of time and input required by busy project teams.
So yes, while the R&D tax credit has been a success, and the move to increase the rate to 30 per cent is welcome, there is still room for improvement. Shorten the remittance period, simplify the claims process, and make it crystal clear that construction and other project-based sectors are not merely eligible but prime candidates for the relief. After all, anything that supports the competitiveness of one of Ireland’s most successful industries can only be a positive thing.
Get in touch
To explore whether your business could benefit from R&D tax relief or to discuss how Invennt could support your current claims process, contact Angela Sammon on [email protected] or (083) 875 2847.