Many businesses, however, miss out on recompense for their endeavours either through a lack of awareness or a lack of understanding of the relief that’s available to them. This is especially the case for small and medium-sized enterprises, who could benefit most from the financial reward. Here, we investigate R&D tax credits and how they can help SMEs who innovate.

What are R&D tax credits?

R&D tax credits enable businesses that are working to provide innovative solutions to industry-wide problems to claim the money spent on their research back from HMRC. The projects being undertaken must benefit the sector as a whole in some way, rather than just the individual company – so for example, if your business is creating a prototype engine that is more energy efficient than existing ones, you could be able to make a claim.

What are the criteria for claiming?

There are certain criteria laid out by the government which define whether an organisation is eligible for R&D tax credits. As outlined above, businesses must be in pursuit of a product or process that will affect the wider industry in a positive way.

To claim R&D relief for SMEs, there are further stipulations. Your business must:

• Employ less than 500 employees
• Have an annual turnover no greater than €100 million or a balance sheet total of under £86million
• Be a limited company in the UK
• Have been trading for more than one year

Businesses that exceed the above figures must claim under the slightly different RDEC scheme. Fulfilment of the above, however, means that your company could be eligible to claim R&D tax relief of up to 230% of the qualifying costs. In real terms, that means for every £100 you spend on research and development, you can reduce the corporation tax paid on your profits by £230 (inclusive of the original £100 spent).

Making a claim

Claims can be made by inputting the total qualifying expenditure on the Company Tax Return form (CT600). If your business has been investing in eligible R&D projects for a while, but this is your first claim, you can also submit a backdated claim for the appropriate funds.

Speaking to an R&D tax credit specialist can help you determine firstly whether your project qualifies for a claim, and secondly whether you can make a backdated claim on longer term projects. They can also assist with the claims procedure, which can be complex if factors such as overseas R&D are involved. Over 90% of eligible businesses are thought to be failing to claim the relief they’re due, so find out today if you could receive remuneration.

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Ms Zappone, the minister for children and youth affairs, supported a plan to introduce a common consolidated corporate tax base (CCCTB) across the EU. The Economic and Social Research Institute estimated that it would have cost Ireland as much as €400 million if applied to last year’s tax take.

The first part of the proposals — establishing a common tax base — seeks to give companies one set of rules with which to calculate their taxable income across Europe.

The second part aims to have multinationals file a consolidated tax return that reflects their activity across the entire EU as opposed to filing a return with each individual member state, as is the case at present.

The system would link the amount of taxes due to each state with the company’s level of sales, jobs and fixed assets in that country.

This methodology would likely reduce Ireland’s tax take given that the vast bulk of companies’ sales take place outside of the Irish market, which is comparatively much smaller than that of other member states.

The commission’s proposals do not seek to change member states’ individual tax rates.

Michael Noonan, the finance minister, said that a consolidated tax base would significantly narrow Ireland’s tax base and result in tax hikes or spending cuts to make up the shortfall.

Enda Kenny warned last year that he feared the rules marked the first step towards harmonisation of corporate tax rates, which Ireland strongly opposes.

In an interview with The Sunday Times Ms Zappone said that she would welcome the consolidation of corporate tax rates throughout Europe if it reduced the role they played in competing for foreign direct investment. She also said that she was in favour of a consolidated tax base.

“If there is more transparency or if we are moving towards — and this is what I would like to see — a consolidated corporate tax base, I think that means taxation policies can be utilised less as a competitive tool,” Ms Zappone said.

“If the focus is taken off that, then we would have to compete in other ways. For example, we would have to start making maybe additional investments in education at third level or languages at primary level.”

Brian Hayes, Fine Gael MEP, said that Ms Zappone’s comments were at odds with the government’s position and reiterated his opposition to the proposals.

He added that the minister appeared to be conflating the issue of a consolidated tax base, which would be introduced under CCCTB, with a common EU tax rate, which is not in question.

“For ministers to be talking about things they don’t seem to be fully au fait with is a very dangerous concept indeed,” he said.

“I think we stick to the government’s position that we discuss the base and see if it’s workable.

“People need to talk with a bit more clarity when they’re speaking on these issues. The Irish government’s position — and it’s mine too — is that we’ll clearly sit down and discuss and talk with colleagues on the question of the base but there can be absolutely no acceptance of the principle of consolidation.”

He said that the proposals would create a “taxation hole” and called on the minister to outline how she proposed to make up the lost tax revenue.

“The acceptance of consolidation across the European Union is effectively the movement of taxes away from Ireland to other member states where their economic activity lies and of course the bigger member states want that — wouldn’t you?” Mr Hayes said.

He added that Ms Zappone’s suggestion that the state could invest more in education and languages if a consolidated tax base was introduced did not make sense because Ireland would have less tax revenue to reinvest in public services.

Ms Zappone claimed that the state was too reliant on income taxes because it had agreed to accept less tax from multinationals to attract them to Ireland. She argued that ordinary workers could be charged less tax if companies paid “even a wee bit more”.

Michael McGrath, the finance spokesman, said that Ms Zappone’s comments flew in the face of government policy and rejected the EU’s tax proposals.

“Any attempt to apply a uniform single corporation tax rate across all EU member states will be opposed by Fianna Fail”, he said.

“This is completely unacceptable to me and to my party. Fianna Fail will protect Ireland’s tax sovereignty, and our ability to set our own tax rates, at all times.

“Taxation policy is one of Ireland’s main mechanisms of driving investment into Ireland, and ensuring that Ireland continues to be a major beneficiary of foreign direct investment. This will not be up for negotiation. Minister Zappone is clearly going against stated government policy. Government ministers need to speak with one voice on this issue of crucial importance to our economic and enterprise strategy,” Mr McGrath said.

Seamus Coffey, an economics lecturer at University College Cork, told the Oireachtas finance committee in December the proposed common consolidated tax base was the single biggest threat to Ireland’s ability to attract and retain investment.

“It’s hard to imagine any reform — even unilateral US tax reform — posing a greater threat to the huge gains from Ireland’s most successful economic policy of attracting [foreign investment] than the proposed CCCTB,” Mr Coffey said.

Appearing before the same committee Ronan Hession, head of business tax at the Department of Finance, said that the proposals were unlikely to be introduced because of the detrimental impact they would likely have on a number of member states.

He added that they would do little to tackle tax avoidance, as the commission has suggested, but would significantly reduce the state’s control over domestic tax issues.

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Representatives of the drinks industry claim that the proposed sugar-sweetened drinks (SSD) tax is discriminatory and will penalise low-income families while also threatening jobs and businesses in the sector. Some manufacturers such as Britvic warned that they would have no choice but to pass on the cost of the tax to consumers.

The warnings were among 30 submissions on the tax that were made to the Department of Finance as part of a consultative process. Plans to press ahead with the SSD tax were confirmed by Michael Noonan, the finance minister, in last year’s budget but its introduction has been delayed until April 2018 to coincide with the launch of a similar tax in the UK.

Mr Noonan said the government was being prudent in aligning the time frame and structure of Irish tax with the UK. “It is of utmost importance to me that such a tax is as effective as possible, as fair as possible, and minimises the administrative burden on business,” he said last October.

The Department of Finance said that the effectiveness of the measure would depend on its scope and the rate set, as well as on the response of the soft drinks industry to reformulating their products. It also said it was not concerned that an Irish SSD tax would encourage cross-border shopping in Northern Ireland, provided that the UK tax was set at a similar level and implemented at a similar time.

The Department of Health has proposed that the tax should apply to all water and juice-based drinks that have 5g or more of added sugar per 100ml. Most soft drinks and energy drinks have between 10g and 11g of added sugar per 100ml.

Figures released last October showed that there were more than 54,000 obese children in Ireland.

Food and Drink Industry Ireland (FDII), a division of Ibec, the employers’ body that represents more than 150 manufacturers and suppliers, said Ireland’s most important indigenous industry did not need a new tax when it was already facing the challenge of Brexit.

It also claimed that scientific evidence of the efficacy of such taxes in changing consumer behaviour and tackling obesity was inconclusive.

The Irish Beverage Council asked the government to include a review and a sunset clause if it pressed ahead with the tax. It said that 70 per cent of the population would be hit with the tax even though obesity was a problem for only 4 per cent of people who consumed sugar-sweetened drinks daily.

Coca-Cola said the tax was fundamentally flawed, and that it penalised a category accounting for only 3 per cent of calorie intake while ignoring other sources of sugar in people’s diets.

The company also warned that the tax would increase imports and encourage cross-border and black market trading, as well as placing a significant financial and administrative burden on manufacturers. It pointed out that it had already reduced the calories and sugar in its portfolio of soft drinks over the last five years by 8 per cent, with reductions of up to 30 per cent in some brands such as Sprite. It was committed to reducing sugar by a further 10 per cent by 2020, it added.

“It is disappointing that the government considers it necessary to impose a very selective regulatory intervention on a specific food and drink category that has already substantially reduced sugar intake from the consumption of its products, while other sources of sugar in the diet are ignored,” a spokesman said.

Lucozade Ribena Suntory Ireland said the tax held the soft drinks industry being solely responsible for obesity and that not drinking soft drinks was regarded as “the magical solution to an extremely complex problem”.

The Royal College of Physicians of Ireland (RCPI) said there was ample research to show that sugar-sweetened drinks were associated with weight gain, type 2 diabetes and poor oral health, but said studies had shown that only taxes raising prices by between 10 and 20 per cent would reduce consumption levels of soft drinks.

The Institute of Public Health welcomed the tax as part of a suite of necessary measures to curb excess sugar consumption.

Several bodies for and against the tax said there was no basis for excluding dairy-based drinks.

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