Your trusted adviser for R&D Tax Credits and R&D Grants
Consumable items can be included in your R&D tax credit claim, with some exceptions for items later sold and rent.
Ireland's R&D tax credit allows companies to recover up to 35% of their qualifying expenditure on research and development activity. But when it comes to consumable materials, including raw materials, chemical compounds, or components used during experimental work, the rules are more nuanced than many claimants expect.
Getting the calculation right matters, especially if those materials have commercial value after the R&D process.
The R&D tax credit is available on expenditure incurred "wholly and exclusively in the carrying on" of qualifying R&D activities. That phrase carries more weight than it might appear to. It is narrower than "for the purposes of" R&D, and narrower again than "in connection with" R&D. Revenue applies it strictly: the expenditure must be incurred as a direct and integral part of the R&D process itself.
Consumable materials that typically qualify include:
This is where many claims require closer analysis. Revenue addresses a scenario that arises frequently in manufacturing, pharmaceutical, and process industries: R&D activity that produces experimental outputs which have downstream commercial use.
Here’s the rule from Revenue’s guidance:
“Where it is reasonable to consider that there will be a saleable product, the lower of cost or net realisable value of any materials or other saleable product which remain after the R&D activity, should be deducted from the expenditure claimed.”
This essentially means that if you expect that any of the materials used in your R&D will be sold or will be incorporated into a product that is sold, you should deduct either the cost or the net value of the materials (whichever is lower).
The key phrase is "reasonable to consider." This is assessed when you’re doing the R&D, not retrospectively when the claim is prepared.
No matter what the outcome is, you must deduct any consumables that aren’t used in the R&D process. This is part of the apportionment process which you have to do for all cost categories.
A manufacturer runs a process improvement trial using 1,000 items, each with a direct cost of €5. Of those 1,000 items, 30 are retained within the R&D process for further testing and analysis. The remaining 970 items are saleable as finished product.
At the time of the trial, it was reasonable to consider that most of the output would be saleable. The qualifying expenditure is €150 (the cost of the 30 items used within the R&D process). The €4,850 attributable to the 970 saleable items is deducted.
The deduction applies even where the commercial outcome was not certain at the outset. The test is not whether the company knew the items would be saleable; it is whether it was reasonable to consider that they might be.
Another example:
A pharma company spends €5,000,000 in their 2026 period on Phase 3 trials for a new drug. The R&D activities include the costs of raw materials in three full scale batches, as well as the unsuccessful attempts carried out before.
Pharma products have uncertain outcomes in terms of scaling and manufacturing, as well their stability and effectiveness in the long term. At the time of carrying out the trials, it’s unreasonable to assume that the product would be sellable at the end of the work.
In this case, the uncertainty of this project’s outcomes meant that all consumables used in this process are eligible, as the company couldn’t know if there would be a saleable product at the end.
Revenue's guidance draws a careful distinction between R&D activity where genuine scientific uncertainty exists and activity where uncertainty relates only to the commercial outcome.
Where scientific uncertainty is there throughout the R&D process, it may not be reasonable to assume that a saleable product will come about. In that case, the deduction for saleable output does not apply, and the full cost of materials consumed in the R&D may qualify.
The distinction is not always straightforward to apply, particularly in sectors where established science and novel application overlap. Worth noting is that Revenue will scrutinise this analysis in an audit, and the basis for the conclusion should be documented contemporaneously.
The documentation typically includes a contemporaneous assessment of why (or why not) the result would be saleable, the valuation basis for the cost or net realisable value and records that identify the materials consumed.
Some companies will do R&D alongside their usual trade, building and experimenting while running their existing processes. Revenue has a provision for these companies, so they know how to claim.
Only additional expenditure that can be wholly attributed to R&D can be claimed. The base costs of your trade aren’t eligible; those would’ve been spent either way. But any incremental costs that relate to the R&D you carried out (additional time, resources or waste) can be included.
For example:
A manufacturing company has a live production line producing bottle caps. The company wants to experiment with a new material that is lighter and cheaper, but they’re uncertain if it can be used in their existing production line. They run additional experiments alongside their current production to see if this material could be used.
The company can claim for the consumable materials used in this experimentation, as well as the energy used while running the production line. Any additional waste in the usual production resulting from the R&D can also be claimed.
The company’s staff records the time spent running the experiments versus standard running to apportion R&D versus non-R&D work, as well as carefully tracking waste.
This is a fraught section of the R&D guidance and requires very careful allocation with strong documentation to stand up to scrutiny. You should be ready to defend your calculations with evidence.
Rent can be included in your R&D tax credit claim, so long as it is “wholly and exclusively” used in your R&D process.
The starting position is that rent on a space used to carry on R&D activity will generally be expenditure incurred "for the purposes of" or "in connection with" the R&D, rather than "in the carrying on" of it. This means that most companies can’t claim their rental costs, as their spaces are usually related to your general trade, not just R&D.
Where rent can qualify is where the rented space is integral to the R&D activity itself. The test Revenue applies is whether the R&D could have been undertaken without the specialised nature of that space. A cleanroom or specialised laboratory is the clearest example. If the activity requires a controlled environment that only that space can provide, and the R&D could not have been carried out elsewhere, the specialised nature of the facility can be said to be integral to the research process.
General office space does not meet this threshold. An office is the setting in which R&D happens; it does not itself perform a function within the R&D process. The same reasoning applies to standard manufacturing facilities. Even where qualifying R&D takes place on a production line, the rent on the manufacturing facility is unlikely to be eligible because the rent is not incurred wholly and exclusively in the carrying on of those R&D activities.
In practice, the key question is not "do we use this space for R&D?" but "is this space essential to the R&D?" Only where the answer to the second question is yes can you have a reason for including rent as qualifying expenditure.
A consumables-heavy R&D claim requires more structured thinking at the allocation and valuation stage. The risk in either direction is real: overstating your expenditure by failing to account for saleable output or understating by taking a conservative view of what "reasonable to consider" means.
If your company is conducting R&D that involves significant material costs, particularly in sectors where experimental outputs have downstream commercial use, this analysis is worth conducting before the claim is prepared rather than during it.
If you're working through a consumables-heavy R&D claim and want to ensure the calculation is both defensible and complete, contact Myriad to discuss your specific circumstances.
Ireland's R&D tax credit can cover subcontracted R&D costs, subject to a 15% cap and €100,000 floor. Learn the rules, notification requirements, and exceptions.
Consumable items can be included in your R&D tax credit claim, with some exceptions for items later sold and rent.
Partnering with a university on R&D? Irish companies can claim up to 30% back on qualifying costs – with a cap. Here's what Revenue allows and how to do it right.
Please contact us to discuss how working with Myriad can maximise and secure R&D funding opportunities for your business.
Contact us
info@myriadassociates.ie