RESEARCH DEVELOPMENT:TAX EXPERTS have described the further amendments to the research and development (RD) tax credit scheme as a "halfway house" between industry and the Department of Finance.
The scheme allows companies investing in RD to offset their spend against their corporation tax bill.
The amount allowable is the increase over what was spent in 2003. In 2014, the base year was due to roll over to 2004, but the Finance Bill cements 2003 as the base year for all future years.
Ken Hardy, a tax partner with KPMG, said the move provided "certainty for the future" but disadvantaged firms who invested heavily in 2003.
His colleague Anna Scally pointed out that other European jurisdictions have volume-based schemes in place where "every penny counts".
"Ireland Inc should be encouraging incremental spend on RD every year," said Ms Scally.
Kevin McLoughlin, Ernst Young's head of tax services, said the changes represented a positive shift in Government policy and signalled a shift towards a volume-based system.
"Clearly, the Government is looking to move that direction by freezing the base year at 2003 which is positive. However, if that is the intention, why not get rid of the base year completely?" asked Mr McLoughlin.
Fergal O'Brien, an economist with business group Ibec, said that overall the changes "were quite disappointing" and the Bill "could have done a lot more".
It is now possible to offset the credit against the prior year's corporation tax, with any outstanding credit refunded as a tax credit over the following three years.
"We were looking for a full offset against all other taxes," said Mr O'Brien.
"It would make us more competitive when Irish plants are competing against other jurisdictions for RD investments."
He also pointed out that because the credit is against corporation tax, Irish subsidiaries bidding for projects can't include the credit as a benefit as it is costed at group level not project level.
"It doesn't help Irish plants as much as it could," said Mr O'Brien.
"There would have been a cost neutral benefit by moving it above the line."
The Bill also contains a "fly in the ointment", according to Mr Hardy as claims now have to be made within 12 months of the end of the tax year in question rather than four years.
"There are people still doing their RD tax credit claims for those years ," said Mr Hardy. "Rather than four years to claim, now they have four weeks."
Minister for Finance Brian Lenihan had already signalled in his Budget speech that the percentage of RD spend that could be claimed would increase from 20 to 25 per cent.
