R&D Tax Credit Ireland: The Rate Just Increased to 35% (What You Need to Claim)

Ireland’s research and development tax credits regime just got more generous. The R&D tax credits rate has moved up from 30% to 35%, and the first-year payment threshold has also been increased, both under the most recent Finance Act covering accounting periods commencing on or after 1 January 2025. Revenue’s Tax and Duty Manuals (TDMs) on the credit have been refreshed alongside the legislation, sharpening expectations around qualifying activities, qualifying expenditure and the documentation that needs to sit behind a claim.

For Irish companies investing in innovation, the headline is simple: every €1 of qualifying R&D spend now generates a 35-cent credit instead of 30 cents. For a profitable company, R&D tax credits reduce corporate tax. For a loss-making company they convert into a cash payment over three instalments. Either way, more money flows back into the business, faster. The R&D tax credits regime sits alongside (and is separate from) the general corporation tax deduction available for revenue-account R&D spend, and an unused tax deduction can stack with a tax credit claimed on the same expenditure provided the rules are followed correctly. This guide walks through the changes, what qualifies, what does not, how R&D tax credits are calculated and paid, and what a defensible claim file looks like under the updated TDM guidance.

What Changed in Ireland’s R&D Tax Credit Under the Latest Finance Act

The headline change is the rate. The R&D corporation tax credit rate has gone from 30% to 35%, applicable to qualifying R&D expenditure incurred in accounting periods commencing on or after 1 January 2025. This is the third meaningful uplift in recent years: the rate was 25% for periods commencing in 2022 and earlier, before being raised to 30% in respect of accounting periods commencing on or after 1 January 2024, and now to 35% for periods from 1 January 2025. Ireland is moving in the opposite direction to several other EU jurisdictions, which makes its R&D tax credits more attractive relative to peers and improves the effective tax position for innovation-led companies.

Alongside the rate move, the first-year payment threshold has been increased. This is the cash element of the credit that can be paid in the first year rather than spread over the standard three-instalment schedule. The increase means more of the credit is converted to cash sooner, which is materially helpful for early-stage and loss-making companies whose corporation tax liabilities are limited.

Revenue’s TDM update sits alongside the legislative change. The refreshed guidance does not redefine the qualifying tests, but it sharpens the description of what Revenue expects to see in claim documentation, particularly around the technical narrative, the apportionment of staff costs, and the treatment of subcontracted R&D.

What this means for company claimants:

• A larger credit per euro of qualifying spend.
• More of the cash payment available in year one, improving the working-capital impact for younger companies. A company may also see a noticeably better return on R&D tax credits where qualifying activities are spread across multiple projects, since the rate uplift compounds across the full claim.
• Higher Revenue expectations around evidence and documentation, with weaker R&D tax credits claims more likely to be challenged on review.

How the 35% R&D Tax Credit Works in Real Terms

The R&D Tax Credit is a corporation tax credit available to companies carrying out qualifying research and development activities. R&D tax credits are calculated as 35% of the qualifying R&D expenditure incurred in the accounting period. An R&D activity may attract the credit even where the underlying project is still in progress at year-end, provided the qualifying tests are met for the work carried out in the period.

Two simple worked examples:

• Profitable company: €500,000 of qualifying R&D expenditure × 35% = €175,000 credit. The credit can be offset against the company’s corporation tax liability, with any excess available as a cash payment over three instalments (subject to the rules).
• Loss-making start-up: €200,000 of qualifying R&D expenditure × 35% = €70,000 credit. With no corporation tax to offset, the credit is paid out as cash over three instalments, with the increased first-year payment threshold delivering more in year one than under the previous rules.

For comparison, the same €500,000 spend at the previous 30% rate would have generated a €150,000 credit. The 5-point increase represents a 17% uplift in the credit value before any change to qualifying expenditure, which is a material improvement for any company already running a credible R&D claim.

What R&D Activities Qualify for R&D Tax Credits in Ireland?

The qualifying activity tests for R&D tax credits have not changed under the latest Finance Act. Revenue’s framework, set out in Section 766C of the Taxes Consolidation Act 1997 and the refreshed TDM, requires that R&D activities must:

• Seek to achieve scientific or technological advancement beyond what is already publicly available.
• Involve the resolution of scientific or technological uncertainty that competent professionals in the field could not readily resolve.
• Be carried out in a systematic, investigative or experimental manner, with a recognisable methodology and a record of what was tried and what was learned.

R&D activities that typically qualify include:

• Software and platform development where there is genuine technological uncertainty, for example new algorithms, novel data architectures or performance breakthroughs beyond off-the-shelf solutions.
• Engineering, manufacturing and process improvement work that targets material gains in yield, capability or efficiency through experimentation.
• Life sciences and medtech experimentation, including pre-clinical work, device prototyping and process scale-up.
• Hardware and electronics development where new functionality is being designed and tested.

R&D activities that typically do not qualify include:

• Routine debugging, bug fixes, software maintenance or cosmetic UI changes.
• Standard configuration of off-the-shelf software or implementation of established frameworks.
• Market research, sales innovation or commercial product launches where the uncertainty is commercial rather than technological.
• Quality control, routine testing or training activities.

Every R&D project must be assessed individually against the qualifying tests. A company that runs 12 development projects in a year is not making one claim; it is making 12 mini-assessments, each with its own evidence of advancement and uncertainty.

What Does Revenue Look For When Deciding If Activities Qualify?

Revenue’s qualifying activity review focuses on three threads:

• Advancement: what existed before the project started, what the project sought to advance, and how the advancement compares to the public state of knowledge.
• Uncertainty: what specifically was uncertain at the outset, why a competent professional could not readily resolve it, and how the project attempted to resolve it.
• Systematic approach: the project’s methodology, the iterations attempted, the results obtained, and the conclusions drawn.

The common pitfalls that trigger Revenue challenges are vague technical narratives, over-claiming on routine development work, and project descriptions that read like marketing copy rather than technical assessments. A strong claim sounds like a technical write-up. A weak claim sounds like a sales pitch.

What R&D Costs and Expenditure Qualify?

Qualifying expenditure for the R&D Tax Credit broadly mirrors the costs directly attributable to the qualifying R&D activities. The main categories Revenue accepts are:

• Staff costs: salaries, employer PRSI and certain pension contributions for employees working on qualifying R&D, apportioned by time spent on those activities. Time-tracking records, project logs and reasoned apportionment basis are essential.
• Consumables and materials: items consumed or transformed in the R&D activity, including prototype materials and test consumables.
• Plant and machinery: a proportion of qualifying plant and machinery used for R&D, subject to specific rules and apportionment for non-R&D use.
• Subcontracted R&D and university payments: third-party R&D costs are eligible subject to restrictions, including a cap based on the company’s own in-house R&D expenditure and a notification requirement to the subcontractor.
• Royalties and certain licence costs: where directly used in the qualifying R&D activity, subject to the specific rules.

Costs that typically do not qualify or are restricted include:

• General overheads (rent, utilities, IT support) without a clear, evidence-based link to the R&D activity.
• Sales, marketing and training costs.
• Capital expenditure on routine plant and machinery used in commercial production rather than R&D.
• Costs incurred outside the qualifying activity scope, even where they sit on the same project budget.

The single most common error is over-allocating staff time to R&D. Apportionment must be defensible. A senior engineer who genuinely spent 60% of their year on qualifying R&D is a strong claim line; the same engineer claimed at 95% with no time records is exactly the kind of item that gets challenged.

Do Buildings or Facilities Qualify?

Expenditure on buildings and facilities used for R&D is treated separately and is subject to its own specific rules and time apportionment. The general position is that building expenditure can qualify where the building is used wholly or partly for R&D, with a use proportion applied. Borderline items are common, particularly for shared laboratory or workshop space. Specialist advice is worth seeking before adding building or facility expenditure into a claim.

How the Credit Is Paid: Offset, Cash and the Increased First-Year Threshold

The R&D Tax Credit gives company claimants two routes to value:

1. Offset against current-year corporation tax. The credit can be set against the company’s corporation tax liability for the accounting period in which the qualifying expenditure was incurred.
2. Cash payment over three instalments. Any excess credit, or the full credit for a loss-making company, is payable in cash over three instalments across three accounting periods, subject to the rules.

The first instalment is paid earliest. Under the previous rules, the first-instalment cash payment was capped at the higher of a fixed amount or a percentage of the credit. The most recent Finance Act increased that fixed amount, so more of the credit converts to cash in the first year than was previously possible.

The practical impact:

1. SMEs and start-ups typically benefit most. Loss-making companies that previously had to wait two and three years for the bulk of the cash element will see more in year one.
2. Profitable companies benefit primarily from the rate increase, with the offset against corporation tax taking the credit’s first slice. The increased first-year cash threshold matters mainly where the credit exceeds the tax bill.

For most claimants, the cash benefit lands within 90 days of the relevant filing milestone, subject to Revenue processing and any review work.

How to Claim the R&D Tax Credit in Ireland

The claim process sits inside the company’s regular corporation tax return cycle. A clean, defensible claim follows the same sequence every year:

1. Identify qualifying projects. Walk through the year’s R&D work and confirm which projects meet the advancement and uncertainty tests. Discard projects that do not, no matter how innovative they felt to the team.
2. Quantify qualifying expenditure. Pull staff costs, consumables, materials, plant and machinery and subcontracted spend. Apportion across qualifying and non-qualifying activity, with a clear methodology.
3. Build the technical narrative. For each project, capture what was being attempted, the uncertainty being resolved, the methodology used, and the results. This is the heart of the claim.
4. Assemble the claim pack. Technical narratives, project lists, cost workings, payroll evidence, contracts with subcontractors and the apportionment basis sit in a single audit-ready file.
5. Submit through the corporation tax return. The claim is made via the company’s CT1 corporation tax return online filing, within 12 months of the end of the accounting period in which the qualifying expenditure was incurred.

The 12-month deadline is hard. Missed claims for prior accounting periods are not generally retrievable, so a company that has been doing qualifying R&D for several years without claiming will be locked out of the older periods. The right move is to focus on the current period and the immediately prior period where still in time, and to put a process in place that captures future R&D activity properly.

What Documentation Supports a Defensible R&D Claim?

Revenue’s TDM update sharpens the documentation expectation around three areas: the technical narrative, the financial workings, and the audit trail.

Technical documentation should include:

1. Project descriptions setting out the baseline (state of knowledge before the project) and the targeted advancement.
2. A clear articulation of the scientific or technological uncertainties faced.
3. Records of the methodology, experiments, iterations, results and conclusions.
4. Project status by year (whether the work was ongoing, completed or abandoned).

Financial documentation should include:

1. Payroll records and time-tracking or time-apportionment basis for each qualifying employee.
2. Invoices and supporting evidence for consumables, materials and subcontracted R&D.
3. Cost allocation workings that tie each claimed amount back to the underlying ledger.
4. Contracts and notifications for subcontracted R&D arrangements.

Governance documentation should include:

1. Internal sign-off on the qualifying status of each project.
2. An updated project list reconciling claims back to ongoing R&D activity in the business.
3. A standalone “claim pack” that a Revenue reviewer could pick up and follow without supplementary explanation.

How to Prepare for a Revenue Review or R&D Audit

Revenue reviews of R&D claims focus on eligibility and evidence, not on quibbling about a few euros of expenditure. The questions that get asked are about the qualifying tests, the technical narrative, and the apportionment basis.

The common risk areas:

1. Vague technical narratives that do not articulate the advancement and uncertainty in plain technical terms.
2. Overstated staff time apportionments without time-tracking records to support them.
3. Misclassification of routine development work as qualifying R&D.
4. Subcontracted R&D where the notification to the subcontractor was not made or where the cap interaction has not been properly modelled.
5. Plant and machinery or building apportionments without a defensible use methodology.

The best protection is contemporaneous record-keeping. A technical narrative written nine months after the project finished is less convincing than one written at the time. Time records captured during the year carry more weight than a retrospective estimate.

Element	Previous position	Current position (Finance Act 2024, effective 1 Jan 2025)
Credit rate	30%	35%
First-year payment threshold	Lower fixed threshold	Increased fixed threshold (more cash payable in year one)
Qualifying activity tests	Advancement, uncertainty, systematic approach	Unchanged (TDM guidance refreshed)
Claim deadline	12 months from end of accounting period	Unchanged
Payment schedule	Three instalments across three accounting periods	Unchanged, with larger first-year cash element

FAQs About the R&D Tax Credit in Ireland

What is the R&D Tax Credit rate in Ireland now?

The R&D Tax Credit rate is 35%, up from 30%, for qualifying R&D expenditure incurred in accounting periods commencing on or after 1 January 2025. In practical terms, every €100,000 of qualifying spend now generates a €35,000 corporation tax credit.

Who can claim the R&D Tax Credit in Ireland?

Companies within the charge to Irish corporation tax can claim, provided they are carrying out qualifying R&D activities in Ireland or, in certain cases, within the EEA. The company must hold the qualifying expenditure and must claim within 12 months of the end of the accounting period in which that expenditure was incurred.

Can software development qualify for R&D tax credits in Ireland?

Yes, where the work involves a real technological advancement and the resolution of technological uncertainty that a competent professional could not readily resolve. Routine debugging, maintenance, cosmetic changes and standard configuration do not qualify, even where the underlying product is innovative.

What records do we need to keep to support an R&D claim?

The minimum documentation includes a technical narrative for each project, a financial workings file with payroll and time apportionment, supporting invoices for consumables and subcontracted R&D, and a reconciliation back to the ledger. Contemporaneous evidence carries materially more weight than retrospective reconstruction.

How long does it take to receive an R&D Tax Credit payment?

For credit payable in cash, the first instalment typically lands within 90 days of the relevant filing milestone, subject to Revenue processing and any review work. Where the claim is selected for review, payment can be delayed until the review is concluded.

Ready to Claim the 35% R&D Tax Credit?

The rate increase to 35% and the increased first-year payment threshold make the R&D Tax Credit one of the most attractive innovation supports in the Irish tax system. The catch is that Revenue’s expectations on evidence and documentation have also moved up. The companies that come through reviews cleanly are the ones with strong project narratives, defensible apportionments, and a claim file that a reviewer can read end-to-end.

At Kinore, our team supports Irish companies with R&D tax credits claims from end to end: eligibility assessment against the qualifying activity tests, technical narrative drafting, quantification of qualifying expenditure, claim pack assembly aligned to the updated Revenue TDMs, and support during Revenue reviews and audits. Senior-led, with dedicated client management and the depth to absorb complex multi-project claims without bottlenecks. To get going, have a project list, a high-level description of each project, the team involved, approximate spend by project, and the key dates ready for the first conversation. Speak with our team to book an R&D eligibility assessment and a claim review at the new 35% rate.