Deloitte response to the public consultation on the Research & Development Tax Credit and on Options to Support Innovation

Background 

On 2 April 2025, the Minister for Finance launched a public consultation the Research and Development Tax Credit and on options to support Innovation. The purpose of the consultation, as outlined by the Department of Finance’s Tax Expenditure Guidelines and as announced in Budget 2025 is to carry on an evaluation of the R&D tax credit. Furthermore, the consultation notes that the Programme for Government 2025 highlights a commitment to examine options to reward innovation and digitalisation and to encourage such innovation by domestic and international companies. 

Core recommendations

Our core recommendations include: 

• Amendment to related party expenditure limits and caps on subcontracted expenditure: We would recommend the removal of restrictions on outsourcing to include related party expenditure within the scope of the R&D tax credit capped at 100% of the internal R&D spend. We also recommend removal of the current cap applying to third level subcontracting and increasing the cap for unconnected party subcontracting currently in place. Lastly we recommend that costs relating to agency staff be included within internal spend qualifying for the R&D tax credit. 
• Enhancements to reduce the administrative burden and risks associated with the R&D tax credit: We would recommend that penalties and interest should not be applied in cases of technical disagreements between taxpayers and Revenue. Similarly, we call for the establishment of a clear timeline for the processing and payment of R&D tax credit refunds by the Revenue, and the development of a centralised audit process to ensure consistency and uniform interpretation for all R&D tax credit claimants.
• Introduction of new tax credits addressing key areas of innovation: We would recommend the establishment of standalone tax credits, to be aligned with the definition of “qualified refundable tax credits” for the purposes of Pillar Two and the US Foreign Tax Credit (FTC) Regulations. We would recommend that the new tax credits be established in the following key areas of change:

i) Decarbonisation tax credit to provide relief for expenditure incurred by businesses to lower carbon emissions. 

ii) Artificial Intelligence (AI) and Digitalisation tax credit to provide relief for relevant expenditure related to the safe development, implementation and use of AI and for certain categories of expenditure to assist businesses with the digitalisation process and its acceleration. 

iii) Investment Tax Credit to provide relief on the acquisition on the acquisition of eligible investments - such as those related to software development, digital infrastructure, and cybersecurity, as well as for tangible assets (namely plant and machinery).

For other related recommendations, please read our response to this feedback statement here.  

Overall comments 

Ireland has a robust and sustainable R&D ecosystem underpinned by several factors such as a strong innovative and internationally competitive enterprise base; growing employment, sales and exports; a renowned pool of talent; and a coherent joined-up innovation ecosystem that is responsive to emerging opportunities, delivering enhanced impact through the creation and application of knowledge. Ireland has the capacity to meet the needs of R&D investors and offers the ideal commercial, political and social environment in which to carry out successful and profitable R&D activities. But in our view the Irish R&D ecosystem requires ongoing protection in a highly mobile and competitive world. 

Next steps 

The Department of Finance will consider the responses to this consultation and may invite key stakeholders to meet with them and with Revenue officials to discuss the responses.