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Budget 2027 raises R&D tax credit subcontracting limits to 20% or €200,000, lifts the first-year payment to €105,000 and adds a 5% wage cost uplift.
Budget 2027 keeps Ireland's R&D tax credit at 35%, but it changes how much of your spend can be included and how quickly you're paid. The measures include higher subcontracting limits, a larger first-year payment, a 5% uplift on wage costs and an easier route to satisfying the science test for regulated clinical trials.
This post explains each change, what it could be worth in practice, and which details are still waiting on the Finance Bill.
According to the government's Budget 2027 announcement, the enhancements follow the review of the R&D tax credit undertaken last year and the work set out in the Research and Development Tax Credit and Innovation Compass. The aim is to keep Ireland competitive in attracting quality foreign direct investment in R&D, while also supporting an innovation-driven domestic enterprise sector.
Five changes have been announced:
The headline rate hasn't changed. Budget 2026 already took it to 35%, and we don’t expect any further increase any time soon. These are announcements until Finance Bill 2027 is enacted, and the start dates will be set out there.
There have always been caps for qualifying expenditure outsourced to either an unconnected third-party or an institute of higher learning; each is currently capped at the higher of 15% of your qualifying in-house R&D expenditure or €100,000, and you must have incurred at least the same amount of R&D expenditure in house.
Budget 2027 raises both limits to the higher of 20% or €200,000. This recognises the importance of supporting collaboration between businesses and third-level institutions, and of giving you access to external resources that support your in-house work. Subcontracting has been the part of the regime most often singled out in the debate over widening the scope of the credit, so this is a meaningful move.
The €200,000 floor and the 20% figure each matter in different situations, so here are two examples:
A medical device company spends €400,000 on qualifying in-house R&D and pays a specialist testing laboratory €200,000 to run part of a validation study. Under the current rules, the cap is the higher of €60,000 (15% of €400,000) and €100,000, so only €100,000 of the laboratory's fees can be included. Under the new limit, the cap is the higher of €80,000 and €200,000, so the full €200,000 can be included. At a 35% credit, the extra €100,000 of qualifying spend is worth €35,000.
A software company spends €2,000,000 on qualifying in-house R&D and pays a university €350,000 to research a new machine-learning method. Under the current rules, the cap is the higher of €300,000 (15% of €2,000,000) and €100,000, so €300,000 of the university's invoice can be included. Under the new limit, the cap is the higher of €400,000 and €200,000, so the full €350,000 can be included. That adds €50,000 of qualifying spend and €17,500 of credit.
There’s no change to the in-house requirement, so you'll still need qualifying R&D of your own of at least the same value as your outsourced work before you can claim it.
For the detail on what counts, see our guides on claiming R&D tax credits on subcontractors and university research partnerships.
Your R&D tax credit is normally paid in three annual instalments. In Year 1 you receive the greater of 50% of the credit or the first-year threshold, and the rest follows in Years 2 and 3.
Budget 2027 increases the first-year threshold from €87,500 to €105,000. That means the first €105,000 of a claim is payable in full in the first year, rather than over the standard three instalments. The government's stated aim is to provide a cash-flow benefit for smaller R&D projects and to encourage more companies to engage with the regime.
A company with a credit of €100,000 currently receives €87,500 in Year 1, with the remaining €12,500 spread across the next two years. With the new threshold, it receives the whole €100,000 in Year 1.
A company with a credit of €300 would still receive the credit in the usual 50%-30%-remainder (€150,000 in Year 1, €90,000 in Year 2 and €60,000 in the final year).
If your credit is large enough that 50% of it already exceeds the threshold, the change won't alter your first instalment. It makes the biggest difference to smaller and mid-sized claims.
The government has announced a change to improve the recognition of the R&D tax credit for the purposes of preliminary corporation tax. The intended result is a cash-flow benefit to companies that offset the credit against their tax liabilities.
The detail hasn't been published yet, so it isn't possible to say exactly how the change will operate. If you use your credit to reduce a corporation tax liability, this is the measure to watch in the Finance Bill. Until the legislation is in place, you should keep calculating preliminary tax on the current basis.
A new provision will allow you to increase your qualifying cost base by 5% of your qualifying R&D wage costs, provided your company has enough R&D expenditure. R&D-active companies have additional supporting costs that fall outside the definition of qualifying R&D expenditure. The uplift will be calculated from your existing R&D wage costs, so it shouldn’t be much extra admin.
A company has €1,000,000 of qualifying R&D wage costs. The uplift adds €50,000 to its qualifying cost base, and at 35% that's an extra €17,500 of credit, on top of the credit on the wage costs themselves. This assumes the company meets the expenditure condition.
What counts as a "sufficient level" of expenditure hasn't been defined, so don't assume you'll qualify until the Finance Bill confirms the test. The UK’s R&D tax credit scheme applies a 30% R&D-intensity rule, which might be adopted; in the UK scheme, eligible companies have a minimum of 30% of their total expenditure qualify for R&D tax credits.
The uplift rests entirely on your wage costs, which makes the evidence behind your staff cost claim more valuable than before. Time records and clear apportionment will now support the credit on those costs and the uplift calculated from them.
An amendment will provide that if a clinical trial is regulated, that fact may be used to satisfy the science test. This recognises R&D work undertaken by Irish companies as part of global trials and reduces their administrative burden of demonstrating it.
This will matter most to pharmaceutical, biotech and medical device companies that take part in multinational trials, where the Irish company's contribution can be hard to separate from the wider programme. The science test is only one half of a claim, though. You'll still need to meet the accounting test and show that your costs are qualifying R&D expenditure.
The clinical trials measure will be provided for at Committee Stage, because the technical work on the legislation is still ongoing.
Nothing changes in your claim until the legislation is passed, so current rules apply to everything you're preparing today. It's a good moment, though, to review how your subcontracting arrangements compare with your in-house R&D spend, and whether the new limits would bring costs into your claim that are currently excluded. Check that your agreements and invoices clearly describe the R&D activities each subcontractor carries out.
It's also worth reviewing your time and payroll records for staff working on R&D, because the wage cost uplift depends on them. If you're taking part in regulated clinical trials, keep documentation of your role in the trial from the outset.
If you'd like to understand how Budget 2027 affects your own claim, or how to structure your subcontracting to benefit from the new limits, don't leave it to chance. Contact Myriad to discuss your position.
Budget 2027 raises R&D tax credit subcontracting limits to 20% or €200,000, lifts the first-year payment to €105,000 and adds a 5% wage cost uplift.
DTIF Call 8 is open with €40 million available. See the 3 February 2027 deadline, who can apply, funding rates and how to prepare your consortium.
From Innovation Vouchers to the RD&I Fund and Innovation Partnerships, here's how to match Enterprise Ireland's funding to where your project stands today.
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