R&D Tax Credits for Technology
R&D Tax Credit: A Growing Force in Technology
According to the Irish Revenue Institute, 1,500 technology-based companies received the R&D tax credit in 2011 and this figure has continued to grow. However, there have been complications in this sector especially when it comes to documentation of various technical work. For instance, people who develop agile software are faced with the challenge of recording the day-to-day technical activities due to the complexity of the work involved. This presents a challenge when it comes to validation of the tax credits with the Revenue authority.
Eligibility for R&D Activities
Companies are eligible for a 25% R&D tax credit for expenses incurred for all eligible research and development activities. However, the company must be able to provide evidence of the R&D work claimed. The R&D tax credit is meant to encourage companies to become more innovative and produce better products than those that already exist. This is critical for enabling Ireland to become a global hub of innovation.
Avoiding Poor Documentation
The major weakness when claiming in the technology sector is poor documentation. Many innovative activities that occur in this field involve less documentation. For instance, face-to-face communication is often more effective than written communication but may require evidence such as meeting notes to claim R&D. This leaves the industry with minimal documents which can rarely convince the Irish Revenue Institute to validate a tax credit claim. This challenge is further compounded by the fact that the revenue authority has not developed a candid validation guideline for different industries. Faced with such a challenge, those looking to claim the R&D tax credit in the field of technology and media communications should be highly careful to document any activity which they carry out.