R&D tax credit changes offer a welcome boost, but compliance remains a challenge

Budget 2027 saw some material improvements to our R&D tax regime, however for claimants there are real practical issues with the cost of compliance, since Revenue audits of R&D claims are now routine and the time and professional fees involved will significantly reduce the benefit of these changes.

The R&D tax credit remains at 35% following in an increase to the rate in last year's budget, but Budget 2027 introduces a number of targeted enhancements aimed at improving access and cashflow for claimants. The existing limits on subcontracted R&D expenditure have been increased, with the cap for work outsourced to third-level institutions rising from 15% to 20% of qualifying expenditure and the limit for third-party subcontracting increasing from €100,000 to €200,000. 

The first-year payment threshold has also been increased from €87,500 to €105,000, providing faster access to cash support for claimants. In addition, a new enhancement in respect of qualifying R&D wage costs has been introduced, which will allow claimant companies to increase their qualifying cost base by 5% of qualifying R&D wage costs, subject to the company having incurred a sufficient level of expenditure.