CCAN members and other companies involved in R&D should be aware of beneficial changes to the R&D tax credit rules introduced in Budget 2012.  Lacking detail but it looks like the first €100k in R&D expense no longer needs to be incremental vs. a base year, fees incurred by companies sponsoring university research may now be eligible and the recovered credit can be used to reward key R&D employees. 

The summary taken from the Budget Summary document is shown below

1. Volume basis
The first €100,000 of qualifying R&D expenditure will benefit from the 25% R&D tax credit on a volume basis. The tax credit will continue to apply to incremental R&D expenditure in excess of €100,000 as compared with such expenditure in the base year 2003. This will provide a targeted benefit to SMEs.

2. Outsourcing limits
At present sub-contracted R&D costs are eligible where they do not exceed 10% of total costs or 5% in the case of sub-contracting to third level institutions. This limit can disproportionately affect smaller companies who may have greater need to outsource R&D work than larger multinationals with greater internal resources. The outsourcing limits for sub-contracted R&D costs are being increased to the greater of 5 or 10% as appropriate or €100k. This will provide a targeted benefit to SMEs.

 3. Use of the credit to reward R&D employees
Companies in receipt of the R&D credit will have the option to use a portion of the credit to reward key employees who have been involved in the development of R&D. It is envisaged that there would be no additional cost to the Exchequer as the bonus comes from the R&D credit already received by the company and the employee still pays the full tax liability on their other income. This change will be monitored closely and if abused will be removed.