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Taxes Consolidation Act, 1997 (Number 39 of 1997)

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766C. Research and development corporation tax credit

(1) Subject to subsection (2), where in respect of any accounting period a company makes a claim in that behalf, it shall be entitled to an amount (in this section referred to as ‘the credit’) equal to 25 per cent of the qualifying expenditure attributable to the company as is referable to the accounting period.

(2) (a) This subsection applies in respect of a company (in this subsection referred to as a ‘surrendering company’) that—

(i) in respect of any accounting period claims the credit in accordance with this section, and

(ii) specifies that the credit, or any portion of the credit, shall be treated as an overpayment of tax under subsection (7)(a),

where the amount specified by the company under subparagraph (ii) is in excess of the company’s liabilities (within the meaning of section 960H), and the difference between that amount so specified and those liabilities shall be referred to in this subsection as ‘the excess’.

(b) A surrendering company may make a claim under paragraph (c) in respect of the amount of the excess.

(c) A surrendering company may, on making a claim in that behalf, surrender all or part of the excess, to one or such number of key employees as the surrendering company may specify but the aggregate of such amounts, attributable to such employees, may not exceed the amount so surrendered.

(d) The part of that amount of the credit that may be surrendered by the surrendering company as referred to in paragraph (c) may not exceed the corporation tax payable by that surrendering company in respect of that accounting period.

(e) A claim in accordance with this subsection shall be made in such form as the Revenue Commissioners may prescribe and the surrendering company shall notify the key employee, in writing, of any amount surrendered to that employee.

(3) Where in respect of any accounting period a company makes a claim under subsections (1) and (2) and the amount so claimed or surrendered, or both, as the case may be, is subsequently found not to have been as is authorised by this section, then, the amount which is not so authorised shall be first attributable to a claim under subsection (1) in priority to a claim under subsection (2).

(4) Where in respect of an accounting period, a company makes a claim under subsection (2) and it is subsequently found that the amount surrendered in accordance with that claim (hereafter in this section referred to as the ‘initial amount’) is not as authorised by this section, then, in relation to each key employee, the amount surrendered, which is authorised by this section, shall be an amount (hereafter in this section referred to as the ‘relevant authorised amount’) determined by the formula—

A × B

    C

where—

A is the portion of the initial amount attributable to that key employee in accordance with the claim under subsection (2),

B is the aggregate amount that may be surrendered by the company in respect of that accounting period as is authorised by this section, and

C is the initial amount,

and the company shall notify the key employee in writing of the relevant authorised amount.

(5) For the purposes of subsection (1)

(a) qualifying expenditure attributable to a company in relation to a relevant period shall be so much of the amount of qualifying group expenditure on research and development in the relevant period as is attributed to the company in the manner specified in a notice made jointly in writing by the qualified companies that are members of the group, but where no such notice is given means an amount determined by the formula—

Q × C

     G

where—

Q is the qualifying group expenditure on research and development in the relevant period,

C is the amount of expenditure on research and development incurred by the company in the relevant period at a time when the company is a member of the group, and

G is the group expenditure on research and development in the relevant period,

(b) where a relevant period coincides with an accounting period of a company, the amount of qualifying expenditure on research and development attributable to the company as is referable to the accounting period of the company shall be the full amount of that expenditure, and

(c) where the relevant period does not coincide with an accounting period of the company—

(i) the qualifying expenditure on research and development attributable to the company shall be apportioned to the accounting periods which fall wholly or partly in the relevant period, and

(ii) the amount so apportioned to an accounting period shall be treated as the amount of qualifying expenditure on research and development attributable to the company as is referable to the accounting period of the company.

(6) Where, in an accounting period, a company makes a claim in respect of the credit under subsection (1), the amount so claimed shall be payable in 3 annual instalments as follows:

(a) the first instalment shall equal—

(i) €25,000, or if lower, the amount of the credit claimed, or

(ii) 50 per cent of the amount of the credit claimed,

whichever is the greater;

(b) the second instalment, if any, shall be an amount determined by the formula—

(A – B) X 3/5

where—

A is the amount of the credit claimed, and

B is the amount of the first instalment under paragraph (a);

(c) the third instalment, if any, shall be an amount determined by the formula—

A – (B + C)

where—

A is the amount of the credit claimed,

B is the amount of the first instalment under paragraph (a), and

C is the amount of the second instalment under paragraph (b).

(7) The company shall specify in respect of each instalment referred to in subsection (6) whether such amounts, or any portion of such amounts, are to be—

(a) treated as an overpayment of tax, for the purposes of section 960H, or

(b) paid to the company by the Revenue Commissioners.

(8) The credit, if any, arising to a company in accordance with this section shall not be income of the company or another company for any tax purpose.

(9) (a) Any claim under this section shall be made within 12 months from the end of the accounting period in which the expenditure, giving rise to the claim, is incurred and shall be made in the return that the company is required to file, under Part 41A, in respect of that accounting period.

(b) The company shall, when making a claim in accordance with paragraph (a), provide details of —

(i) the amount of the expenditure attributable to research and development activities incurred by the company during the accounting period concerned in respect of—

(I) machinery or plant as referred to in section 766(1A)(a), and

(II) emoluments of the employees carrying on qualifying research and development activities,

and

(ii) the sum of the remaining qualifying expenditure incurred by the company during the accounting period concerned.

(c) In this subsection, “emoluments” and “employees” have the meanings given to them by section 983.

(10) (a) Any claim in respect of the credit under subsection (1) (whether the amount of the credit is to be treated as an overpayment of tax under subsection (7)(a) or paid to the company under subsection (7)(b)) shall, for the purposes of 851A and 851B, Chapter 4 of Part 38 and Part 47, be treated as a claim for a credit and the amount so claimed shall be treated as an amount of tax refundable.

(b) In respect of any claim in respect of the credit that remains unpaid, for the purposes of determining an amount in accordance with subsections (3) or (4) of section 1077F, a reference to an amount of tax that would have been payable for the relevant period by the person concerned shall be read as if it were a reference to the amount so claimed.

(c) (i) Subject to subparagraph (ii), where a company makes a claim in respect of the credit and it is subsequently found that the claim is not as authorised by this section then the company may be charged to tax under Case IV of Schedule D for the accounting period in respect of which the payment was made or the amount surrendered, as the case may be, in an amount equal to 4 times so much of the amount of the credit as is not so authorised.

(ii) An amount chargeable to tax under this paragraph shall be treated—

(I) as income against which no loss, deficit, expense or allowance may be set off, and

(II) as not forming part of the income of the company for the purposes of calculating a surcharge under section 440.

(d) Where in accordance with paragraph (c) an assessment is made the amount so charged shall, for the purposes of section 1080, be deemed to be tax due and payable and shall carry interest as determined in accordance with subsection (2)(c) of section 1080 as if a reference to the date when the tax became due and payable were a reference to the date the amount was paid or offset, under section 960H, by the Revenue Commissioners.

(11) Where a claim in respect of the credit under this section is made the amount of the credit shall be paid or offset in full, in the manner specified by the company under subsection (7), by the Revenue Commissioners within 48 months from when a valid claim is made and where a valid claim has been made—

(a) the first instalment shall be payable on the making of the return referred to in subsection (9),

(b) the second instalment shall be payable—

(i) where the accounting period (in this subsection referred to as the ‘first-mentioned accounting period’) immediately succeeding the accounting period in respect of which the claim was made is for a period of 12 months, on the filing of the return that the company is required to file under Part 41A for the first-mentioned accounting period, or

(ii) in all other cases, 12 months after the specified return date, within the meaning of Part 41A, for the return referred to in subsection (9),

and

(c) the third instalment shall be payable—

(i) where the accounting period (in this subsection referred to as the ‘second-mentioned accounting period’) immediately succeeding the first-mentioned accounting period is for a period of 12 months, on the filing of the return that the company is required to file under Part 41A for the second-mentioned accounting period, or

(ii) in all other cases, 24 months after the specified return date, within the meaning of Part 41A, for the return referred to in subsection (9).

(12) No amount of the credit shall be paid or offset under subsection (11) unless a valid claim has been made to the Revenue Commissioners for that purpose.

(13) Where a company specifies that the first instalment, under subsection (6)(a), is to be treated, under subsection (7)(a), as an overpayment of tax, and where that amount is, under section 960H, offset in whole or in part against the company’s corporation tax payable (within the meaning of Part 41A) for the accounting period, then, for the purposes of calculating the amount of preliminary tax due in respect of that accounting period and the subsequent accounting period under section 959AR or 959AS, as the case may be, the amount of corporation tax payable by the company for that accounting period shall be reduced by the amount so offset.

(14) In this section, “valid claim” means a claim in relation to the credit which is made under and in accordance with this section and in respect of which all information which the Revenue Commissioners may reasonably require to enable them determine if, and to what extent, the credit is due to a company in respect of an accounting period, has been furnished by that company.

(15) In this section, a reference to an amount payable, in so far as the reference is in respect of the credit, shall be construed as a reference to an amount to be offset under section 960H pursuant to subsection (7)(a) or to be paid under subsection (7)(b), as the case may be.

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Inserted by FA22 s27(4). Applies in respect of accounting periods the specified return date (within the meaning of Part 41A) of which is on or after 23 September 2023.