How the R&D Tax Credit Works

Ireland's R&D tax credit allows companies to claim up to 35% of their eligible R&D expenditure, either as a reduction in tax or as a cash payment from Revenue. Combined with the standard corporation tax deduction of 12.5%, the total benefit can reach up to 47.5% of qualifying spend.

This guide explains what the credit is worth, which costs qualify, how you're paid, and how to claim. It also covers the changes announced in Budget 2027, which don't affect any claim you're preparing today.

What is the R&D tax credit worth?

The credit is a percentage of your eligible R&D expenditure, and the rate depends on when your accounting period began:

• Before 1 January 2026: 30%
• On or after 1 January 2026: 35%

The credit sits on top of the standard 12.5% corporation tax deduction for the same spend, so for accounting periods beginning on or after 1 January 2026, each €100,000 of eligible R&D is worth up to €47,500. The higher rate hasn't changed which costs qualify; it only changes the percentage you claim.

Here is what that looks like in practice:

Your company spends €300,000 on eligible R&D in an accounting period beginning on or after 1 January 2026. The 35% credit is worth €105,000 and the standard 12.5% deduction adds €37,500, giving a total benefit of €142,500.

You can estimate your own figures with our R&D tax credit calculator.

What costs are eligible?

Eligible expenditure covers the costs of carrying out qualifying R&D, including:

• Staff costs, including wages, bonuses, and pension contributions for employees working on R&D
• Materials and consumables used in the R&D
• Software and development tools
• A proportion of related utilities
• Subcontractor and university costs, within the limits below

For employees, you'll normally need to apportion salary between R&D and other work using accurate time records. For accounting periods beginning on or after 1 January 2026, if an employee spends at least 95% of their time on qualifying R&D, 100% of their emoluments qualify, which removes the need to apportion for minor non-R&D tasks.

You can also claim for R&D you outsource to an unconnected third party or to a university or institute of higher education. Each is capped separately at the higher of 15% of your qualifying in-house R&D expenditure or €100,000, and you need to have spent at least as much on R&D in house. Our guides to claiming on subcontractors and university research partnerships explain how the caps work in practice. Budget 2027 plans to raise both limits, as set out below.

How do you receive your credit?

Revenue pays the credit in three annual instalments. For each instalment, you choose whether to take it in cash, use it to offset tax liabilities, or surrender it to key employees. Group companies can also surrender excess credit to another group company, and you'll need to make an election if you want it to go to a specific company.

The instalments work as follows:

• Year 1: The greater of 50% of the credit or the first-year threshold
• Year 2: Three-fifths of the remaining balance
• Year 3: The remaining balance

The first-year threshold depends on when your accounting period began:

• On or after 1 January 2024: €50,000
• On or after 1 January 2025: €75,000
• On or after 1 January 2026: €87,500
• On or after 1 January 2027: €105,000

If your total credit doesn't exceed the threshold, you receive all of it in Year 1. Otherwise, the threshold only matters if it's higher than 50% of your credit.

If you take an instalment as an overpayment set against your corporation tax liability, you must factor the offset into your preliminary corporation tax for that period and the next. Our Tax Cloud guide to the three-instalment payment system goes into more depth.

How do you apply for R&D tax credits?

1. Check whether you need a pre-filing notification. First-time claimants, and companies that haven't claimed in the last three years, must notify Revenue in advance. Our guide to pre-filing notifications explains how.
2. Identify your eligible R&D activities. Your projects need to seek to advance in science or technology and to overcome a scientific or technological uncertainty.
3. Calculate your eligible expenditure. Keep accurate time records and apportion costs where staff have mixed roles.
4. Prepare a technical report. This describes your R&D and should be kept on file in case Revenue asks for it.
5. Make your claim. The claim goes through your Corporation Tax return (Form CT1), where you declare how you want to receive the credit.
6. Wait for processing and payment. Revenue processes your claim and pays the credit in instalments.

When do you need to submit by?

You need to make your claim within 12 months of the end of the accounting period.

If you need to submit a pre-filing notification, it must reach Revenue at least 90 days before you make your claim.

A company with an accounting period ending 31 December 2026 has until 31 December 2027 to claim. If it's a first-time claimant planning to submit on 30 June 2027, it must send its pre-filing notification by 1 April 2027.

What's changing in Budget 2027?

Budget 2027 keeps the credit at 35%, but changes how much of your spend you can include and how quickly you're paid. Five changes have been announced:

• Higher subcontracting limits: The cap for third parties and third-level institutions rises from the higher of 15% or €100,000 to the higher of 20% or €200,000
• A larger first-year payment: The threshold rises from €87,500 to €105,000
• A 5% uplift on wage costs: This is added to your qualifying cost base, for companies with a sufficient level of R&D expenditure that hasn't yet been defined
• Better recognition for preliminary tax: This gives a cash-flow benefit where you offset the credit against tax liabilities
• A simpler science test for regulated clinical trials: The fact that a trial is regulated may be used to satisfy the test

These are announcements until Finance Bill 2027 is enacted, and the start dates will be set out there, so current rules apply to everything you're preparing today. Our full guide to Budget 2027 and the R&D tax credit explains each change with worked examples.

Key takeaways

• The credit is 35% for accounting periods beginning on or after 1 January 2026, worth up to 47.5% of qualifying spend with the 12.5% corporation tax deduction.
• Payment comes in three instalments, and the first-year threshold is €87,500 for accounting periods beginning on or after 1 January 2026, increasing to €105,000.
• You have 12 months from the end of your accounting period to claim, and any pre-filing notification is due at least 90 days before.
• Budget 2027 changes are announced, not enacted, so current rules apply until Finance Bill 2027 sets the start dates.
• Good records make a claim straightforward to defend. Accurate time records and a clear technical report give you what you need if Revenue asks questions about your claim.

If you'd like to understand how the credit applies to your own R&D spend, or how the Budget 2027 changes could affect your next claim, don't leave it to chance. Contact Myriad to discuss your position.