The CCAB-I sought clarification from Revenue on the retrospective application of the treatment of rental expenditure for the purposes of the R&D tax credit as stated by Revenue in an update to the Tax and Duty Manual (TDM) 29-02-03 which issued on 1 July.

The CCAB-I noted that many companies claim rental expenditure as a qualifying expense for R&D purposes where such expenditure is incurred wholly and exclusively in the carrying on of research and development and had no reason to believe that such expenditure did not qualify in Revenue’s view, until the TDM clarification issued on 1 July.

In response, Revenue state: “in line with existing practice to date, where rent is apportioned between the research and development trade and another trade, it will be necessary to display that this expense was incurred wholly and exclusively in the carrying on of the research and development trade activities, and not in connection with or for the purposes of those activities.”

Revenue stress that the phrase “in the carrying on” is narrow in scope and costs not wholly and exclusively incurred “in the carrying on” of the R&D trade activities do not qualify as relevant expenditure.