ICAI have today issued Information Sheet 04/2009 Accounting Treatment of Research and Development Tax Credit. The Research and Development (R&D) tax credit was introduced into legislation by Section 33 Finance Act 2004 (now contained in Section 766 Taxes Consolidation Act) with the overall aim of providing a sustainable basis for long term growth in employment by helping companies' competitiveness through reducing the economic cost of undertaking R&D activity. Recent changes to the relief apply from 1 January 2009.
These include an increase from 20% to 25% of the relief itself and a change to how the relief is claimed, whereby it may now be reclaimed in cash, subject to certain limits, where there is insufficient corporation tax liability in the current or previous year. These changes have led companies to re-consider whether the accounting presentation of such relief through the tax line continues to be the only appropriate method of presentation.
The Accounting Committee of ICAI has been asked to consider the accounting treatment of this R&D tax credit under IFRS and Irish GAAP and today issues Info Sheet 04/2009 Accounting Treatment of Research and Development Tax Credit.