Ireland’s commitment to innovation is entering a new phase.

With the publication of the Innovation Compass by the Department of Finance, alongside the continued evolution of the Research and Development (R&D) Tax Credit regime, the direction is clear. Ireland is strengthening its position as a leading location for innovation-led investment.

At Gallagher Keane Chartered Accountants, we are working closely with established and scaling businesses to ensure they are well-positioned to benefit from these developments.

What Has Changed?

Recent updates have significantly enhanced the value and accessibility of the R&D tax credit regime:

• The R&D tax credit rate has increased from 30% to 35%, reinforcing Ireland’s competitiveness
• The first-year refund threshold has increased to €87,500, improving cash flow for businesses investing in innovation
• The regime continues to allow for a high proportion of employee costs to be claimed where staff are substantially engaged in qualifying R&D activities, subject to appropriate apportionment and supporting documentation

In addition, the R&D tax credit now operates on an above-the-line (ATL) basis, meaning the benefit is recognised in the profit and loss account (subject to accounting treatment and certain limitations). This can positively impact key financial metrics, including EBITDA, and is particularly relevant for businesses engaging with investors or lenders.

The credit is also repayable over a three-year period, with the first instalment calculated as the greater of €87,500 (or the amount of the credit claimed, if lower) and 50% of the credit claimed. Subsequent instalments are subject to certain limitations, including the company’s corporation tax and payroll tax profile. In practice, early-stage and high-growth companies may not have corporation tax liabilities in the initial years; however, a sufficient payroll tax footprint (PAYE, PRSI and USC) can support the repayment of the remaining credit. This is an important consideration for cash flow planning, particularly for businesses investing in headcount and scaling operations in Ireland.

These measures provide tangible financial support, particularly for SMEs and large, established organisations making sustained investments in innovation that meet the R&D qualifying criteria.

The Innovation Compass: A Strategic Roadmap

The Innovation Compass sets out a forward-looking framework for the continued evolution of Ireland’s R&D supports.

The Innovation Compass indicates that future policy development may focus on:

• Refinement of qualifying R&D expenditure definitions
• Potential changes to subcontracting rules and collaborative activity
• The potential introduction of additional supports aligned to digital transformation, sustainability and advanced innovation

For larger businesses and groups, these developments may influence how R&D is structured, documented and delivered across jurisdictions. For SMEs, there is a clear opportunity to access enhanced supports while scaling innovation activity.

What This Means for Irish Businesses

There is a clear opportunity for both established enterprises and growing companies that are investing in innovation.

Businesses should now:

• Revisit existing R&D claims to ensure all qualifying activities and costs are captured
• Review methodologies for allocating staff time and overheads, particularly across multiple projects or entities
• Prepare for possible changes to qualifying criteria and documentation requirements
• Align innovation strategies with emerging policy priorities, including digital and sustainability-focused initiatives
• Ensure contemporaneous documentation is maintained to support the scientific and technical basis of qualifying activities, as this remains a key focus area in reviews by the Revenue Commissioners

Early and informed action will be key to ensuring claims remain robust and that businesses are well-positioned to benefit from future enhancements to the regime.

Our Perspective at Gallagher Keane

At Gallagher Keane Chartered Accountants, we support ambitious Irish businesses, from scaling SMEs to large and established organisations, in navigating the R&D tax credit regime with clarity and confidence.

We view the R&D tax credit as a strategic funding mechanism that can:

• Support sustained and large-scale investment in innovation
  ● Enhance cash flow and reinvestment capacity
  ● Strengthen long-term competitiveness across domestic and international markets

With further developments expected, a proactive and structured approach is essential.

Contact us at Gallagher Keane

To discuss how these developments impact your business, contact our team at info@gallagherkeane.ie