Revenue Note for Guidance

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Revenue Note for Guidance

766D Research and development corporation tax credit: expenditure on buildings or structures

Summary

This section provides for a 30 per cent tax credit in relation to qualifying expenditure incurred on the construction or refurbishment on a qualifying building. If the building or structure is sold or ceases to be used within 10 years for the purposes of research and development, or for the purposes of the same trade that was carried on at the beginning of the specified period, no further credit or payment is to be given. Any R&D corporation tax credit already given is to be withdrawn and any payments made recovered.

For accounting periods ending on or before 31 December 2023, the rate of the R&D Corporation tax credit is 25%.

This section applies in respect of accounting periods which the specified return date is on or after 23 September 2023. The definitions as set out in section 766A will continue to apply to this section.

Details

(1) Specified research and development expenditure for the accounting period will be calculated at a rate of 30%.

For accounting periods ending on or before 31 December 2023 the rate of the R&D Corporation tax credit is 25%.

(2)(a), (b), (c) and (d) Where a qualified company claims the credit and is a member of a group of companies. The surrendering company may make a claim specifying that the excess credit (i.e. the difference between the credit and the company’s tax liabilities) or any portion of the credit which is surrendered to another group company with a corresponding accounting period is to be treated as an overpayment of tax of the group company to whom the excess credit was surrendered.

A claim shall be made in such form as the Revenue Commissioners may prescribe.

(3)(a), (b) and (c) Where in an accounting period a company incurs relevant expenditure on a building or structure and a claim is being made in accordance with this section, a clawback of the credit will apply if within 10 years of the beginning of the accounting period in which the expenditure was incurred the building or structure –

  • is sold, or
  • ceases to be used by the company for the purpose of research and development activities or
  • ceases to be used for the purpose of the same trade that was carried on by the company at the beginning of the “specified relevant period”, in connection with which the research and development activities were carried on.

Where any of the above events occur the company will be charged to tax under Case IV of Schedule D for the accounting period in which the building or structure is sold or ceases to be used for the purposes of research and development activities or for the purposes of the trade. The amount charged to tax shall be equal to 4 times the amount claimed.

(3A) Where a company which has made a claim in respect of a qualifying building or structure under section 766D, ceases to carry on a trade (the predecessor) and another company commences to carry on that trade and the research and development activities (the successor) and the predecessor transfers to the successor a building or structure in respect of which -

  1. (3)(a) the predecessor had made a claim under this section
  2. the transfer is a transfer to which section 617 applies, and
  3. at the time of the transfer either or both the specified relevant period and the specified time had not expired,

(3)(b) on, or at any time within 2 years after, the event, the trade and research and development activities are not carried on otherwise than by the successor, and

(3)(c) the building or structure in respect of which relevant expenditure was incurred by the predecessor—

  1. in a case where the specified relevant period had not expired, would continue to be a qualifying building if a reference, in the definition of “qualifying building” in section 766A(1)(a), to activities carried on by the company were construed as a reference to activities carried on by the company and the successor and
  2. continues to be used by the successor throughout the remainder of the “specified time” for the purposes of research and development activities,

then-

  1. the charge to tax under Case IV as provided for in subsection (3) shall not apply in relation to the transfer by the predecessor,
  2. the successor may, to the extent that the predecessor has not, in respect of each instalment referred to in subsection (5), specified that the amount of the instalment, or any portion of that amount, is to be treated as an overpayment of tax in accordance with subsection (6)(a) or paid to the company in accordance with subsection (6)(b), be entitled to such amount that the predecessor would have been entitled to under subsections (1) and (5), and
  3. Subsection (3) shall have effect as if references to company in that subsection were references to successor.

(4)(a) Where the building will not be used by the company wholly and exclusively for the purposes of research and development, the apportionment used to calculate “specified relevant expenditure” or to determine if a building is a qualifying building, must be just and reasonable.

(4)(b) If at any time such apportionment is no longer just and reasonable, any necessary adjustments should be made, which may result in an assessment or repayment.

(5) Where in an accounting period a company makes a claim in respect of the R&D corporation tax credit, the amount claimed shall be payable in 3 annual instalments.

(5)(a) The first instalment shall equal 50 per cent of the amount of the credit claimed.

(5)(b) The second instalment shall be calculated based on three-fifths of the balance remaining.

(5)(c) The third instalment is the balance of the R&D corporation tax credit remaining (i.e. the R&D tax credit amount less the first and second instalments amounts previously claimed).

(6) The company shall specify in respect of each instalment (referred to in subsection (5)) whether such amounts or any portion of the instalment are to be—

  1. treated as an overpayment of tax for the purposes of section 960H or
  2. paid to the company by the Revenue Commissioners.

(7) The R&D corporation tax credit, if any, arising to the company shall not be income of the company or another company for any tax purpose.

(8) Any claim made under this section, must be made within 12 months from the end of the accounting period in which the expenditure on research and development was incurred. The claim shall be made in the company’s corporation tax return in respect of the accounting period.

(8A) When making a claim in accordance with subsection (8), the company shall provide details of the amount of excess R&D tax credits which are non-refundable (under section 766A(4) and which are available to carry forward and be offset against future corporation tax liabilities.

(9)(a) Any claim in respect of the R&D corporation tax credit whether it is a claim for the credit to be treated as an overpayment of tax (subsection (6)(a)) or paid to the company (subsection (6)(b)) shall be treated as a claim for the credit and the amount claimed shall be treated as an amount of refundable tax.

(9)(b) Where a claim for the R&D corporation tax credit remains unpaid, for the purposes of determining an amount in accordance with section 1077F(3) or 1077F(4), 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 an amount so claimed.

(9)(c)(i) Where a company makes a claim in respect of the R&D corporation tax credit and it is subsequently found that the claim is not authorised by this section then the company will 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 surrender, as the case may be in an amount equal to 4 times so much of the amount of the R&D corporation tax credit as is not authorised.

(9)(c)(ii) Where an amount is charged to tax under this paragraph then no loss, deficit, expense or credit shall be allowed to shelter the liability raised, this Case IV amount will not form part of the close company surcharge calculation.

(9)(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 determine 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.

(10) Where a company has made a claim the amount of the credit shall be paid or offset in full by the Revenue Commissioners within 48 months of a valid claim being made. In this regard:

(10)(a) The first instalment shall be payable on the making of the return within 12 months from the end of the accounting period in which the R&D expenditure was incurred as set out under subsection (8).

The second instalment shall be payable—

  1. (10)(b) where the accounting period in which the claim was made was for a period of 12 months the second instalment shall be payable in accounting period immediately succeeding the period (known as the second accounting period) when the claim was first made and upon the filing of the tax return.
  2. in all other cases 12 months after the specified return date as set out in Part 41A for the return referred to in subsection (8).

(10)(c) The third instalment shall be payable —

  1. where the accounting period that the claim was made for was a 12-month period the third instalment shall be payable 12 months immediately succeeding the second accounting period upon the filing of the tax return.
  2. in all other cases it shall be 24 months after the specified return date as set out in Part 41A for the return referred to in subsection (8).

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

(12) Where a company specifies that the first instalment is to be offset against the company’s corporation tax liability for the accounting period, then this amount may be taken into account for the purposes of calculating preliminary corporation tax.

(13) A valid claim for the R&D corporation tax credit is a claim where all the information that the Revenue Commissioners may reasonably require has been provided to them, to enable the Revenue Commissioners determine if and to what extent the credit is due to the company in respect of an accounting period.

(14) A reference to an amount payable in respect of the credit shall be taken as a reference to an amount to be offset in accordance with section 960H and pursuant to subsection (6)(a) or paid under subsection (6)(b), as the case may be.

(15) Nothing will prevent the Revenue Commissioners from examining a claim, and making or amending an assessment, following the payment or offset of the credit, as the case may be, under Chapter 5 of Part 41A.

(16)(a) Where a company has not claimed the R&D tax credit or the R&D corporation tax credit in any of the previous 3 accounting periods, the company is required to notify Revenue in writing on a prescribed form, 90 days before the claim is made, of the company’s intention to make an R&D corporation tax credit claim under this section. The company must provide such particulars in relation to the claim as may be specified in the prescribed form including:

  1. the name, address and corporation tax number of the company
  2. confirmation that the building or structure is a qualifying building,
  3. the proportion of the qualifying building which is to be used for the purpose of carrying on by the company of research and development activities within the meaning of section 766(1)(a) for the specified relevant period, and

details of expenditure incurred by the company on research and development activities which has been or is to be met directly or indirectly by grant assistance or other assistance as set out in section 766A(1)(b)(i).

(16)(b) The Revenue Commissioners may require the company to provide additional information, explanations and particulars and to give any assistance which may reasonably be required for the purposes of inspecting the information which is provided as part of the pre-filing notification process.

(16)(c) The pre-filing notification requirement set out in paragraph (a) of subsection 16 shall not apply where a company has made a claim for the R&D tax credit or R&D corporation tax credit in any of the 3 immediately preceding accounting periods.

(16)(d) “Relevant date” means the date which is 90 days before the claim under subsection (1) shall be made.

Relevant Date: Finance Act 2024