Expect changes to R&D Tax Credit regime in Finance Bill: Leyton

17 Dec 2009

Enhancements to the R&D Tax Credit regime are likely to be introduced in the Finance Bill early next year, according to R&D Tax Credit expert Leyton.

One likely change Leyton suggests may be contained in the Finance Bill is making the R&D tax credit available for offset against employer PRSI instead of against corporation tax, which is the current legislation.

According to Leyton, the Commission of Taxation report published in September this year gave a strong recommendation towards this enhancement of the credit, while Minster for Enterprise, Trade and Employment Mary Coughlan TD also hinted at this possibility in her post-budget speech last week.

“If this change was to be implemented, it would be much more beneficial for some companies, particularly those that are members of an international group and whose performance is judged before tax. To this end, the Irish R&D Tax Credit, which affects the after-tax position of a company, is not considered when making investment decisions,” said Tanguy Morel, General Manager at Leyton.

Low rate of corporation tax no longer enough

According to Leyton, while significant strides have been made to enhance the Irish RDTC since its induction in January 2004, the regime was designed in a pre-recession era and needs to be re-examined to reflect the economic climate in which we currently find ourselves.

While the firm said it fully commended the decision by Minister for Finance Brian Lenihan TD to retain the 12.5pc corporation tax rate in Budget 2010 as a means of attracting foreign direct investment (FDI), it warned that with the global trend moving towards reducing corporation tax rates, a low rate of tax is no longer enough to attract international investment.

“It is imperative that we have attractive and internationally competitive tax incentives to encourage FDI and domestic R&D. These incentives will help foster a knowledge-based economy, making the Government’s strategy for a smart economy a reality and positioning Ireland as an attractive place to do business,” said Mark Byrne, business consultant at Leyton.

Article courtesy of businessandleadership.com