Leadership

Changes to R&D tax credits ‘a missed opportunity’ - Leyton

05.02.2010
The extension of the R&D tax credit system, which was contained in the Finance Bill 2010 published by the Government yesterday, will not dramatically enhance the attractiveness of the R&D tax credit to either SMEs or large companies operating in Ireland, R&D finance experts Leyton have said.

Yesterday’s Bill saw the existing R&D Tax Credit regime amended to cover situations where a company carries out R&D activities in different facilities in separate geographical locations and the activities in one of these facilities is permanently discontinued.

The Bill introduces a concession for the calculation of the base year in the situation where a company closes down or ceases to carry on a trade in one of its ‘R&D centres’. This will be available for accounting periods commencing on or after 1 January 2010.

Taking legislation to next level
According to Leyton, at a time when the Irish Government, and in particular the Department of Finance, are under extreme fiscal pressure to react to the ever-reducing tax take from all areas of taxation, the latest Finance Bill represents a missed opportunity to take this legislation to the next level.

“Existing legislation in this area is good but at a time when very many of our clients are focused on simply staying in business and meeting payroll obligations each week and month, the Finance Bill could and should have provided much-needed government support to reinforce the belief that the Government is serious about rewarding these innovative and industry leading companies for choosing to locate in the Irish State,” said Mark Byrne, Business Consultant at Leyton.

Little benefit for most firms
“The Government appears to have acknowledged the impact of the combined effects of the economic climate and the credit’s incremental basis on the benefits provided by the current R&D tax credit system.But this legislative change will in the main only effect companies operating within a corporate group structure,” said Emma Fidgeon-Kavanagh, Financial Expert at Leyton.

“There were many ways that the credit could have been enhanced to benefit a wider spectrum of innovative companies, for example, PRSI set off, or enhancing the payable tax credit,” she added.

Government support needed
However, according to Leyton, the Minister for Finance Brian Lenihan should be commended for not imposing any new measures in yesterday’s Finance Bill that could be perceived as being anti-commercial to the many companies engaged in R&D activities in Ireland.

Whatever the future development in the R&D tax credit system may be, Leyton said continued public support by Minister Lenihan and the Government for the system will be vital in ensuring that Ireland does not ‘leak’ existing Irish-located high-value employment to jurisdictions offering highly competitive, bespoke R&D legislative solutions.