Ask any Irish business owner whether they qualify for the R&D Tax Credit and most will say no. Ask their accountant the same question and you will often get the same answer. Both are often wrong.
The R&D Tax Credit is one of the most valuable supports available to Irish companies, and Budget 2026 made it significantly more generous. The rate is now 35% of qualifying R&D spend, and the first-year refund threshold has been raised to €87,500 paid as cash. That means a small company doing real innovation work could be sitting on a refund worth tens of thousands of euros before they even file a corporation tax return.
This guide covers what changed in 2026, who actually qualifies, what counts as R&D under Revenue's rules, the costs you can claim, the most common mistakes that get claims refused, and where to start if you want to put a claim together.
What changed in 2026?
Two important changes came in with the October 2025 Budget that take effect for accounting periods ending on or after 1 January 2026:
- The credit rate increased from 30% to 35%. For every €1,000 of qualifying R&D spend, you get €350 back instead of €300. On a €100,000 R&D project, that is €5,000 of extra relief versus the old rate.
- The first-year refund threshold rose from €75,000 to €87,500. This is the amount you can receive back as a direct cash refund in year one, rather than offsetting it against future corporation tax. For loss-making startups and early-stage companies that pay little or no tax, this is the figure that matters.
Beyond the headline numbers, the underlying mechanics did not change in 2026. The credit is still based on qualifying R&D expenditure, it is still claimed through the corporation tax return, and Revenue still expects detailed technical documentation to back up the claim.
Who actually qualifies?
To claim the R&D Tax Credit, your business needs to meet three conditions:
- You are a company subject to Irish Corporation Tax. Sole traders and partnerships are excluded. If you are operating as a sole trader and doing real R&D, the most common move is to incorporate before the claim becomes substantial.
- You carry on qualifying R&D activities as defined by Revenue and the Frascati Manual (the OECD's reference document for R&D classification). More on what this means below.
- The R&D is carried out in Ireland or the EEA. Subcontracted R&D outside this area generally does not qualify, though there are limited exceptions.
There is no minimum company size, no minimum revenue, and no requirement that your R&D succeed. The activities just need to have been genuine attempts to resolve a scientific or technological uncertainty.
What counts as R&D?
This is where most claims succeed or fail. Revenue's definition of qualifying R&D is narrower than what most business owners would call "research and development", but it is also broader than the lab-coat-and-microscope image most people have in their head.
Three tests have to be met for activity to qualify:
1. It must be systematic, investigative, or experimental.
You have to be doing the work in a structured way. Random experimentation does not count. Documented hypotheses, planned test methodologies, recorded results, and a clear research process are all what Revenue is looking for.
2. It must be in a field of science or technology.
This includes software development, food science, materials engineering, environmental science, biotech, mechanical engineering, electrical engineering, applied mathematics, and most areas of computing. Pure social sciences, market research, and operational planning are excluded.
3. It must seek to achieve scientific or technological advancement.
This is the test that catches most marginal claims. You must be trying to resolve a technological uncertainty that a competent professional in your field could not solve based on the existing publicly available knowledge. Routine product development, applying existing techniques to new contexts, or making cosmetic improvements does not qualify.
Worked example. A software company building yet another e-commerce site does not qualify. A software company building a new algorithm to detect fraud in real-time payments processing, where existing tools fall short, almost certainly does. The difference is whether a competent person in the field could have done the work without serious technical investigation.
Common Irish sectors where qualifying R&D is more widespread than people realise include:
- Software and SaaS. Novel algorithms, scalability work at the edge of what existing tools can handle, new approaches to security or data processing.
- Food and beverage production. Recipe development for shelf-life extension, new packaging that maintains product quality, reformulation for allergen reduction, novel processing techniques.
- Manufacturing. Process improvements to reduce waste or energy use, new product designs requiring tooling innovation, robotics integration.
- Construction technology. Modular building techniques, new materials, structural innovation, embodied-carbon reduction methods.
- Medical devices. Virtually all design and testing work in this regulated sector qualifies.
- Agriculture and horticulture. New cultivation techniques, sustainable farming methods, precision-ag systems.
What costs can you claim?
If your activity qualifies, you can include the following types of expenditure in your R&D claim:
- Staff costs for employees directly engaged in the R&D, including the relevant portion of their salary, employer's PRSI, pension contributions, and benefits in kind.
- Materials and consumables used in the R&D project (raw materials, prototype components, lab supplies, software licences specifically used for R&D).
- Subcontracted R&D up to a limit of 15% of total claim spend, performed by another company in the EEA.
- Subcontracted university research up to 5% of total claim spend, where the work is contracted to an Irish or EEA higher-education institution.
- Plant, machinery, and buildings used in the R&D, on a proportional basis if used part-time for R&D and part-time for normal business activity.
- Cloud computing and software-as-a-service directly used for R&D, where this was clarified by Revenue in recent updates.
Costs you generally cannot claim:
- Routine administration, sales, marketing, and HR.
- The cost of producing or distributing the eventual commercial product.
- Training that is not directly part of the R&D project.
- Land and most office furniture.
- Costs that have already been funded by a grant from the State or EU (you cannot double-dip).
How do you actually claim it?
The claim is made through your company's corporation tax return (CT1) for the accounting period in which the R&D expenditure was incurred. There is a strict deadline: claims must be made within 12 months of the end of the accounting period.
The process in practice looks like this:
- Identify qualifying activities. Audit your projects against the three tests above and group qualifying work into discrete R&D projects.
- Cost the activities. Allocate staff time, materials, subcontracted spend, and plant usage to each project. This is where most of the work is, and where most claims get sloppy.
- Write the technical report. For each project, document what scientific or technological uncertainty you were trying to resolve, what work you did, what you learned, and how you knew the existing publicly available knowledge was insufficient. This is the document Revenue will ask for if they audit you.
- File the CT1 with the R&D credit claim. The credit is offset against your corporation tax liability for the year. Any excess is either offset against the next year's tax, paid back as a cash refund up to the first-year threshold (€87,500 in 2026), or carried forward.
Common mistakes that get claims refused
Revenue audits R&D claims at a higher rate than most reliefs. The most common reasons for refusal are:
- Insufficient technical documentation. A short paragraph saying "we developed new software" is not enough. The technical report must clearly establish the uncertainty, the work performed, and the relevance to advancing knowledge.
- Claiming routine product development as R&D. If a competent professional in your field could have done the work using existing knowledge, it does not qualify, no matter how much time or money you spent on it.
- Overstating staff time on R&D. If your CFO spent 5% of her time on R&D activities, you can only claim 5% of her costs, not her full salary. Revenue is particularly sceptical of claims where senior management time is heavily allocated to R&D.
- Claiming activities that were already funded by a grant. If Enterprise Ireland or another State body funded the R&D, you must subtract that funding from the qualifying spend before applying the 35% rate.
- Missing the 12-month deadline. Late claims are not accepted under any circumstances. Many companies discover the credit existed only after the window has closed for their prior year.
R&D Tax Credit versus other Irish supports
The R&D Tax Credit can be claimed alongside many other Irish funding supports, but the interaction matters. A few useful rules of thumb:
- Enterprise Ireland R&D Fund or Agile Innovation Fund: you cannot claim the R&D Tax Credit on the portion of spend that EI funded, but you CAN claim it on the portion you self-funded.
- Innovation Voucher (€5,000): same rule. The €5,000 itself is excluded from the R&D claim, but any additional spend on the same project is claimable.
- SURE refund (Start Up Refunds for Entrepreneurs): completely separate scheme, no interaction.
- Knowledge Development Box (KDB): applies to companies commercialising IP. If you qualify for KDB, the R&D Tax Credit usually runs alongside it.
Should you do this yourself or hire a specialist?
The honest answer depends on the size of your potential claim.
If you expect a claim under about €25,000, you can usually put it together with your existing accountant. The Revenue documentation and templates are public, and the maths is straightforward.
If you expect a claim over €50,000, it is almost always worth bringing in an R&D Tax Credit specialist. They typically charge 15% to 30% of the refund, which sounds expensive, but the technical documentation, defensibility against audit, and identification of qualifying activities you would not have spotted usually more than pay for it. For larger claims (€100,000+), specialists also handle the Revenue correspondence if questions come back.
Whichever route you take, do not file an R&D claim that you cannot defend. A refused claim is a hassle. A claim that gets refused after being paid, and then clawed back with interest and penalties, is much worse.
Where to start
Before any of the above is worth doing, you need to know whether your business has activities that plausibly qualify. The single fastest way to find out is to map your last 12 months of project work against the three tests in this guide. If anything passes, it is worth a proper conversation with a specialist or your accountant.
If you are also planning to spend on R&D in the next 12 months, the wider question is whether there are non-tax supports (grants and vouchers) that could fund part of the work directly, in addition to the eventual R&D Tax Credit claim on whatever you self-fund.