Ireland’s Budget 2027 has been announced, bringing a number of changes to the country’s R&D Tax Credit regime.
For businesses investing in research and development, these updates could create opportunities to increase qualifying expenditure, improve cash flow and simplify aspects of the claims process.
With the changes set to affect how businesses approach their R&D claims, now is a good time to understand what has been announced and consider what it could mean for your organisation.
Key R&D Tax Credit changes in Budget 2027
1. New R&D wage cost enhancement
A new provision will allow companies to increase their qualifying R&D cost base by 5% of qualifying R&D wage costs, subject to the company having incurred a sufficient level of expenditure.
The change is designed to recognise additional supporting costs associated with R&D activity that may currently fall outside the scope of qualifying expenditure.
For businesses with significant employee involvement in R&D projects, this could provide an opportunity to increase the qualifying expenditure included within a claim.
2. Higher limits for subcontracted R&D
Budget 2027 also increases the limits for qualifying expenditure on certain third-party and third-level institution activities. The percentage limit will increase from 15% to 20% and the monetary cap will increase from €100,000 to €200,000.
This could be particularly relevant for businesses that work with external specialists, third-level institutions or other third parties as part of their R&D activities.
3. Improved cash flow for smaller claims
The Budget also introduces an increase to the first-year instalment of the R&D Tax Credit. The amount will increase from €87,500 to €105,000, allowing businesses with eligible claims to access a greater proportion of their credit sooner.
For smaller businesses in particular, earlier access to the credit could provide a useful cash flow benefit and support continued investment in innovation and development.
4. Simplified treatment of regulated clinical trials
Under the changes, regulated clinical trials may be able to use their regulated status to help satisfy the R&D science test. This is intended to reduce the administrative burden for businesses undertaking qualifying clinical research.
For companies operating in areas such as pharmaceuticals, biotechnology and medical research, understanding how this change applies to their activities will be important when preparing future claims.
5. Changes to preliminary tax calculations
Budget 2027 also introduces changes intended to simplify how companies account for their expected R&D Tax Credit when calculating preliminary corporation tax payments.
This should make it easier for businesses to factor their anticipated R&D Tax Credit into their tax planning and improve visibility over their expected tax position.
What does Budget 2027 mean for businesses?
Taken together, these changes represent a further enhancement of Ireland’s R&D Tax Credit regime.
The changes also highlight the importance of having a clear understanding of which activities and costs qualify, whilst ensuring that claims are supported by appropriate technical and financial documentation.
Businesses that are already claiming R&D Tax Credits should consider whether the changes could affect their approach to identifying, capturing and calculating qualifying expenditure. Companies that are not currently claiming should also assess whether they have eligible R&D activities that could benefit from the enhanced regime.
Staying prepared for the changes
As businesses begin to assess the implications of Budget 2027, reviewing your current R&D position can help ensure you are well placed to take advantage of the changes.
The R&D Tax Credit regime can be complex, particularly where projects involve multiple teams, external specialists or significant technical development. A robust technical capture process and accurate identification of qualifying costs remain essential to preparing a well-supported claim.
At CBTax, our specialist team supports businesses across Ireland with their R&D Tax Credit claims, helping them identify qualifying activities, capture eligible expenditure and navigate the requirements of the scheme.
If you would like to understand how the Budget 2027 changes could affect your business or your R&D Tax Credit position, speak to our team.
For further information, view the Irish Government’s full Budget 2027 guide here.
Need to understand your R&D position? Get in touch with CBTax today.