Amendments to the Tax and Duty Manual – Part 29-02-03 – Research and Development (R&D) Tax Credit – include an update to the guidance on rent as an expenditure on R&D activities. The CCAB-I has engaged with Revenue since an update to the R&D Tax Credit Tax and Duty Manual in July 2020 set out Revenue’s position on the general disallowance of rental expenditure in R&D claims.

The updated Tax and Duty Manual now provides that:

• The eligibility of rental expenditure incurred by a company will relate to the extent to which it is incurred wholly and exclusively in the carrying on of the R&D activities.
• Where a company rents a specialised laboratory or a clean room in order to advance its R&D, the question to ask is whether or not the company could have undertaken the R&D activity without the specialised nature of the laboratory or clean room. If the activity could not have been carried out, then the specialised nature of the rented space can said to be integral to the R&D activity the company is carrying on and, to the extent that the expenditure is wholly and exclusively incurred in the carrying on of the R&D activity, rent may be qualifying expenditure.

Further detail on the treatment of rental costs in R&D claims is included in paragraph 4.3 of the manual.

Additional updates to the R&D manual include:

• confirmation that Employment Wage Subsidy (EWSS) and Temporary Wage Subsidy Scheme (TWSS) are considered assistance provided by the State;
• COVID-19 practices for 2020, in relation to the use of a building in a ‘specified relevant period’; and
• a further example of a subcontractor who would not be eligible to claim the R&D tax credit.

See Revenue eBrief No. 89/21 for further details.