Finance Act 2022

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Amendment of Chapter 2 of Part 29 of Principal Act (scientific and certain other research)

27. (1) Section 766 of the Principal Act is amended—

(a) in subsection (1)—

(i) in paragraph (a), by the substitution of “In this section and in section 766C—” for “In this section—”,

(ii) in paragraph (b)—

(I) by the substitution of “For the purposes of this section and section 766C—” for “For the purposes of this section—”, and

(II) in subparagraph (vi)—

(A) in subclause (A), by the substitution of “trade,” for “trade, and”,

(B) in subclause (B), by the substitution of “trade is reduced, and” for “trade is reduced;”, and

(C) by the insertion of the following subclause after subclause (B):

“(C) for the purposes of section 766C(1), as it would if it was incurred in the first accounting period which commenced on or after the time the company begins to trade;”,

and

(iii) by the deletion of paragraph (c),

(b) by the insertion of the following subsection after subsection (4C):

“(4D) Where, in respect of a claim made in respect of an accounting period that commenced before 1 January 2022, an amount is due to be paid as—

(a) a second instalment under subsection (4B)(b)(ii), or

(b) a last instalment under subsection (4B)(b)(iii),

in an accounting period that commences on or after 1 January 2022 (in this subsection referred to as the ‘second-mentioned accounting period’), the company may, notwithstanding subsection (5), within 12 months of the end of the second-mentioned accounting period, make a claim in the return filed under Part 41A to have the excess paid to the company by the Revenue Commissioners, notwithstanding the restrictions set out in subparagraphs (ii)(II) and (iii)(II) of subsection (4B) in relation to the period before the expiry of which the Revenue Commissioners may not make a payment of the second or last instalment, as the case may be.”,

(c) in subsection (6)(a), by the substitution of “for the purposes of this section and section 766C” for “for the purposes of this section”,

(d) in subsection (7)(a)—

(i) by the substitution of “under this section or section 766A, 766C or 766D—” for “under this section or section 766A—”, and

(ii) in subparagraph (ii), by the substitution of “under this section or section 766A, 766C or 766D—” for “under this section, or under section 766A—”,

(e) in subsection (7B)—

(i) in paragraph (b)—

(I) in subparagraph (i)—

(A) by the deletion of “or pursuant to section 766C(4)”, and

(B) by the deletion of “or an amount pursuant to section 766C(4)”,

and

(II) in subparagraph (ii), by the substitution of “Any claim in respect of a specified amount that remains unpaid shall be deemed” for “Any claim in respect of subsection (4B), section 766A(4B) or pursuant to section 766C(4), as the case may be, that remains unpaid, shall be deemed”,

and

(ii) in paragraph (c), by the substitution of the following subparagraph for subparagraph (i):

“(i) Subject to subparagraph (ii), where a company makes a claim in respect of a specified amount and it is subsequently found that the claim is not as authorised by this section or by section 766A, as the case may be, then the company may be charged to tax under Case IV of Schedule D for the accounting period in respect of which the payment was made or the amount surrendered, as the case may be, in an amount equal to 4 times so much of the specified amount as is not so authorised.”,

and

(f) by the insertion of the following subsection after subsection (8):

“(9) (a) A claim shall not be made under subsection (2) or (2A) in respect of expenditure on research and development incurred in an accounting period that commences on or after 1 January 2023.

(b) A company may, in respect of expenditure on research and development incurred in an accounting period make a claim under this section or section 766C.”.

(2) Section 766A of the Principal Act is amended—

(a) in subsection (1)—

(i) in paragraph (a), by the substitution of “In this section and in section 766D—” for “In this section—”, and

(ii) in paragraph (b), by the substitution of “For the purposes of this section and section 766D—” for “For the purposes of this section—”,

(b) by the insertion of the following subsection after subsection (4B):

“(4C) Where, in respect of a claim made in respect of an accounting period that commenced before 1 January 2022, an amount is due to be paid as—

(a) a second instalment under subsection (4B)(b)(ii), or

(b) a last instalment under subsection (4B)(b)(iii),

in an accounting period that commences on or after 1 January 2022 (in this subsection referred to as the ‘second-mentioned accounting period’), the company may, notwithstanding subsection (5), within 12 months of the end of the second-mentioned accounting period, make a claim in the return filed under Part 41A to have such excess paid to the company by the Revenue Commissioners, notwithstanding the restrictions set out in subparagraphs (ii)(II) and (iii)(II) of subsection (4B) in relation to the period before the expiry of which the Revenue Commissioners may not make a payment of the second or last instalment, as the case may be.”,

and

(c) by the insertion of the following subsection after subsection (8):

“(9) (a) A claim shall not be made under subsection (2) in respect of expenditure on research and development incurred in an accounting period that commences on or after 1 January 2023.

(b) A company may, in respect of expenditure on research and development incurred in an accounting period make a claim under this section or section 766D.”.

(3) Section 766B of the Principal Act is amended by the insertion of the following subsection after subsection (3):

“(4) This section shall not apply in respect of a claim made under section 766(4B) or 766A(4B) in a return the specified return date (within the meaning of Part 41A) of which is on or after 23 September 2023.”.

(4) The Principal Act is amended by the insertion of the following sections after section 766B:

“Research and development corporation tax credit

766C. (1) Subject to subsection (2), where in respect of any accounting period a company makes a claim in that behalf, it shall be entitled to an amount (in this section referred to as ‘the credit’) equal to 25 per cent of the qualifying expenditure attributable to the company as is referable to the accounting period.

(2) (a) This subsection applies in respect of a company (in this subsection referred to as a ‘surrendering company’) that—

(i) in respect of any accounting period claims the credit in accordance with this section, and

(ii) specifies that the credit, or any portion of the credit, shall be treated as an overpayment of tax under subsection (7)(a),

where the amount specified by the company under subparagraph (ii) is in excess of the company’s liabilities (within the meaning of section 960H), and the difference between that amount so specified and those liabilities shall be referred to in this subsection as ‘the excess’.

(b) A surrendering company may make a claim under paragraph (c) in respect of the amount of the excess.

(c) A surrendering company may, on making a claim in that behalf, surrender all or part of the excess, to one or such number of key employees as the surrendering company may specify but the aggregate of such amounts, attributable to such employees, may not exceed the amount so surrendered.

(d) The part of that amount of the credit that may be surrendered by the surrendering company as referred to in paragraph (c) may not exceed the corporation tax payable by that surrendering company in respect of that accounting period.

(e) A claim in accordance with this subsection shall be made in such form as the Revenue Commissioners may prescribe and the surrendering company shall notify the key employee, in writing, of any amount surrendered to that employee.

(3) Where in respect of any accounting period a company makes a claim under subsections (1) and (2) and the amount so claimed or surrendered, or both, as the case may be, is subsequently found not to have been as is authorised by this section, then, the amount which is not so authorised shall be first attributable to a claim under subsection (1) in priority to a claim under subsection (2).

(4) Where in respect of an accounting period, a company makes a claim under subsection (2) and it is subsequently found that the amount surrendered in accordance with that claim (hereafter in this section referred to as the ‘initial amount’) is not as authorised by this section, then, in relation to each key employee, the amount surrendered, which is authorised by this section, shall be an amount (hereafter in this section referred to as the ‘relevant authorised amount’) determined by the formula—

where—

A is the portion of the initial amount attributable to that key employee in accordance with the claim under subsection (2),

B is the aggregate amount that may be surrendered by the company in respect of that accounting period as is authorised by this section, and

C is the initial amount,

and the company shall notify the key employee in writing of the relevant authorised amount.

(5) For the purposes of subsection (1)—

(a) qualifying expenditure attributable to a company in relation to a relevant period shall be so much of the amount of qualifying group expenditure on research and development in the relevant period as is attributed to the company in the manner specified in a notice made jointly in writing by the qualified companies that are members of the group, but where no such notice is given means an amount determined by the formula—

where—

Q is the qualifying group expenditure on research and development in the relevant period,

C is the amount of expenditure on research and development incurred by the company in the relevant period at a time when the company is a member of the group, and

G is the group expenditure on research and development in the relevant period,

(b) where a relevant period coincides with an accounting period of a company, the amount of qualifying expenditure on research and development attributable to the company as is referable to the accounting period of the company shall be the full amount of that expenditure, and

(c) where the relevant period does not coincide with an accounting period of the company—

(i) the qualifying expenditure on research and development attributable to the company shall be apportioned to the accounting periods which fall wholly or partly in the relevant period, and

(ii) the amount so apportioned to an accounting period shall be treated as the amount of qualifying expenditure on research and development attributable to the company as is referable to the accounting period of the company.

(6) Where, in an accounting period, a company makes a claim in respect of the credit under subsection (1), the amount so claimed shall be payable in 3 annual instalments as follows:

(a) the first instalment shall equal—

(i) €25,000, or if lower, the amount of the credit claimed, or

(ii) 50 per cent of the amount of the credit claimed,

whichever is the greater;

(b) the second instalment, if any, shall be an amount determined by the formula—

(A - B) X 3/5

where—

A is the amount of the credit claimed, and

B is the amount of the first instalment under paragraph (a);

(c) the third instalment, if any, shall be an amount determined by the formula—

A - (B + C)

where—

A is the amount of the credit claimed,

B is the amount of the first instalment under paragraph (a), and

C is the amount of the second instalment under paragraph (b).

(7) The company shall specify in respect of each instalment referred to in subsection (6) whether such amounts, or any portion of such amounts, are to be—

(a) treated as an overpayment of tax, for the purposes of section 960H, or

(b) paid to the company by the Revenue Commissioners.

(8) The credit, if any, arising to a company in accordance with this section shall not be income of the company or another company for any tax purpose.

(9) (a) Any claim under this section shall be made within 12 months from the end of the accounting period in which the expenditure, giving rise to the claim, is incurred and shall be made in the return that the company is required to file, under Part 41A, in respect of that accounting period.

(b) The company shall, when making a claim in accordance with paragraph (a), provide details of—

(i) the amount of the expenditure attributable to research and development activities incurred by the company during the accounting period concerned in respect of—

(I) machinery or plant as referred to in section 766(1A)(a), and

(II) emoluments of the employees carrying on qualifying research and development activities,

and

(ii) the sum of the remaining qualifying expenditure incurred by the company during the accounting period concerned.

(c) In this subsection, ‘emoluments’ and ‘employees’ have the meanings given to them by section 983.

(10) (a) Any claim in respect of the credit under subsection (1) (whether the amount of the credit is to be treated as an overpayment of tax under subsection (7)(a) or paid to the company under subsection (7)(b)) shall, for the purposes of 851A and 851B, Chapter 4 of Part 38 and Part 47, be treated as a claim for a credit and the amount so claimed shall be treated as an amount of tax refundable.

(b) In respect of any claim in respect of the credit that remains unpaid, for the purposes of determining an amount in accordance with subsections (3) or (4) of section 1077F, a reference to an amount of tax that would have been payable for the relevant period by the person concerned shall be read as if it were a reference to the amount so claimed.

(c) (i) Subject to subparagraph (ii), where a company makes a claim in respect of the credit and it is subsequently found that the claim is not as authorised by this section then the company may be charged to tax under Case IV of Schedule D for the accounting period in respect of which the payment was made or the amount surrendered, as the case may be, in an amount equal to 4 times so much of the amount of the credit as is not so authorised.

(ii) An amount chargeable to tax under this paragraph shall be treated—

(I) as income against which no loss, deficit, expense or allowance may be set off, and

(II) as not forming part of the income of the company for the purposes of calculating a surcharge under section 440.

(d) Where in accordance with paragraph (c) an assessment is made the amount so charged shall, for the purposes of section 1080, be deemed to be tax due and payable and shall carry interest as determined in accordance with subsection (2)(c) of section 1080 as if a reference to the date when the tax became due and payable were a reference to the date the amount was paid or offset, under section 960H, by the Revenue Commissioners.

(11) Where a claim in respect of the credit under this section is made the amount of the credit shall be paid or offset in full, in the manner specified by the company under subsection (7), by the Revenue Commissioners within 48 months from when a valid claim is made and where a valid claim has been made—

(a) the first instalment shall be payable on the making of the return referred to in subsection (9),

(b) the second instalment shall be payable—

(i) where the accounting period (in this subsection referred to as the ‘first-mentioned accounting period’) immediately succeeding the accounting period in respect of which the claim was made is for a period of 12 months, on the filing of the return that the company is required to file under Part 41A for the first-mentioned accounting period, or

(ii) in all other cases, 12 months after the specified return date, within the meaning of Part 41A, for the return referred to in subsection (9),

and

(c) the third instalment shall be payable—

(i) where the accounting period (in this subsection referred to as the ‘second-mentioned accounting period’) immediately succeeding the first-mentioned accounting period is for a period of 12 months, on the filing of the return that the company is required to file under Part 41A for the second-mentioned accounting period, or

(ii) in all other cases, 24 months after the specified return date, within the meaning of Part 41A, for the return referred to in subsection (9).

(12) No amount of the credit shall be paid or offset under subsection (11) unless a valid claim has been made to the Revenue Commissioners for that purpose.

(13) Where a company specifies that the first instalment, under subsection (6)(a), is to be treated, under subsection (7)(a), as an overpayment of tax, and where that amount is, under section 960H, offset in whole or in part against the company’s corporation tax payable (within the meaning of Part 41A) for the accounting period, then, for the purposes of calculating the amount of preliminary tax due in respect of that accounting period and the subsequent accounting period under section 959AR or 959AS, as the case may be, the amount of corporation tax payable by the company for that accounting period shall be reduced by the amount so offset.

(14) In this section, ‘valid claim’ means a claim in relation to the credit which is made under and in accordance with this section and in respect of which all information which the Revenue Commissioners may reasonably require to enable them determine if, and to what extent, the credit is due to a company in respect of an accounting period, has been furnished by that company.

(15) In this section, a reference to an amount payable, in so far as the reference is in respect of the credit, shall be construed as a reference to an amount to be offset under section 960H pursuant to subsection (7)(a) or to be paid under subsection (7)(b), as the case may be.

Research and development corporation tax credit: expenditure on buildings or structures

766D. (1) Where in an accounting period a qualified company incurs relevant expenditure and the company makes a claim on that behalf it shall be entitled to an amount (in this section referred to as ‘the credit’) equal to 25 per cent of the specified relevant expenditure.

(2) (a) This subsection applies in respect of a qualified company (in this subsection referred to as a ‘surrendering company’) that—

(i) in respect of any accounting period claims the credit in accordance with this section,

(ii) specifies that the credit, or any portion of that credit, shall be treated as an overpayment of tax under subsection (6)(a), and

(iii) is a member of a group of companies,

where the amount specified under subparagraph (ii) is in excess of that company’s liabilities (within the meaning of section 960H), and the difference between that amount so specified and those liabilities shall be referred to in this subsection as ‘the excess’.

(b) A surrendering company may make a claim under paragraph (c) in respect of the amount of the excess.

(c) A surrendering company may, on making a claim in that behalf, specify that all or part of the excess is to be treated as an amount of an overpayment (within the meaning of section 960H) by another company which is a member of that group for that other company’s corresponding accounting period.

(d) A claim under paragraph (c) shall be made in such form as the Revenue Commissioners may prescribe.

(3) Where—

(a) in an accounting period a company incurs relevant expenditure on a building or structure,

(b) in relation to that expenditure the credit has been claimed under this section, and

(c) at any time in the period of 10 years commencing at the beginning of the accounting period referred to in paragraph (a) the building or structure is sold or ceases to be used by the company for the purpose of research and development activities or for the purpose of the same trade that was carried on by the company at the beginning of the specified relevant period, in connection with which the research and development activities were carried on,

then the company shall be charged to tax under Case IV of Schedule D for the accounting period in which the building or structure is sold or ceases to be used for the purpose of research and development activities or for the purpose of the trade, in an amount equal to 4 times the amount claimed.

(4) (a) Where expenditure is incurred by a company on a building or structure and the building or structure will not be used by the company wholly and exclusively for the purposes of research and development, the proportion of the use of the building or the amount of the expenditure attributable to research and development shall be such portion of the use of the building or the expenditure as is just and reasonable.

(b) Where, at any time, any apportionment referred to in paragraph (a), or a further apportionment made under this paragraph, ceases to be just and reasonable, then—

(i) such further apportionment shall be made at that time as is just and reasonable,

(ii) any such further apportionment shall supersede any earlier apportionment, and

(iii) any such adjustments, assessments or repayments of tax shall be made as are necessary to give effect to any apportionment under this subsection.

(5) Where, in an accounting period, a company makes a claim in respect of the credit under subsection (1) the amount so claimed shall be payable in 3 annual instalments as follows:

(a) the first instalment shall equal 50 per cent of the amount of the credit claimed;

(b) the second instalment, if any, shall be an amount determined by the formula—

(A - B) X 3/5

where—

A is the amount of the credit claimed, and

B is the amount of the first instalment under paragraph (a);

(c) the third instalment, if any, shall be an amount determined by the formula—

A - (B + C)

where—

A is the amount of the credit claimed,

B is the amount of the first instalment under paragraph (a), and

C is the amount of the second instalment under paragraph (b).

(6) The company shall specify in respect of each instalment referred to in subsection (5) whether such amounts, or any portion of such amounts, are to be—

(a) treated as an overpayment of tax, for the purposes of section 960H, or

(b) paid to the company by the Revenue Commissioners.

(7) The credit, if any, arising to a company in accordance with this section shall not be income of the company or another company for any tax purpose.

(8) Any claim under this section shall be made within 12 months from the end of the accounting period in which the expenditure, giving rise to the claim, is incurred and shall be made in the return that the company is required to file, under Part 41A, in respect of that accounting period.

(9) (a) Any claim in respect of the credit under subsection (1) (whether the amount of the credit is to be treated as an overpayment of tax under subsection (6)(a) or paid to the company under subsection (6)(b)) shall, for the purposes of sections 851A and 851B, Chapter 4 of Part 38 and Part 47, be treated as a claim for a credit and the amount so claimed shall be treated as an amount of tax refundable.

(b) In respect of a claim in respect of the credit that remains unpaid, for the purposes of determining an amount in accordance with subsections (3) or (4) of section 1077F, a reference to an amount of tax that would have been payable for the relevant period by the person concerned shall be read as if it were a reference to the amount so claimed.

(c) (i) Subject to subparagraph (ii), where a company makes a claim in respect of the credit and it is subsequently found that the claim is not as authorised by this section then the company may be charged to tax under Case IV of Schedule D for the accounting period in respect of which the payment was made or the amount surrendered, as the case may be, in an amount equal to 4 times so much of the amount of the credit as is not so authorised.

(ii) An amount chargeable to tax under this paragraph shall be treated—

(I) as income against which no loss, deficit, expense or allowance may be set off, and

(II) as not forming part of the income of the company for the purposes of calculating a surcharge under section 440.

(d) Where in accordance with paragraph (c) an assessment is made the amount so charged shall, for the purposes of section 1080, be deemed to be tax due and payable and shall carry interest as determined in accordance with subsection (2)(c) of section 1080 as if a reference to the date when the tax became due and payable were a reference to the date the amount was paid or offset, under section 960H, by the Revenue Commissioners.

(10) Where a claim in respect of the credit under this section is made the amount of the credit shall be paid or offset in full, in the manner specified by the company under subsection (6), by the Revenue Commissioners within 48 months from when a valid claim is made and where a valid claim has been made—

(a) the first instalment shall be payable on the making of the return referred to in subsection (8),

(b) the second instalment shall be payable—

(i) where the accounting period (in this subsection referred to as the ‘first-mentioned accounting period’) immediately succeeding the accounting period in respect of which the claim was made is for a period of 12 months, on the filing of the return that the company is required to file under Part 41A for the first-mentioned accounting period, or

(ii) in all other cases, 12 months after the specified return date, within the meaning of Part 41A, for the return referred to in subsection (8),

and

(c) the third instalment shall be payable—

(i) where the accounting period (in this subsection referred to as the ‘second-mentioned accounting period’) immediately succeeding the first-mentioned accounting period is for a period of 12 months, on the filing of the return that the company is required to file under Part 41A for the second-mentioned accounting period, or

(ii) in all other cases, 24 months after the specified return date, within the meaning of Part 41A, for the return referred to in subsection (8).

(11) No amount of the credit shall be paid or offset under subsection (10) unless a valid claim has been made to the Revenue Commissioners for that purpose.

(12) Where a company specifies that the first instalment, under subsection (5)(a), is to be treated, under subsection (6)(a), as an overpayment of tax, and where that amount is, under section 960H, offset in whole or in part against the company’s corporation tax payable (within the meaning of Part 41A) for the accounting period, then, for the purposes of calculating the amount of preliminary tax due in respect of that accounting period and the subsequent accounting period under section 959AR or 959AS, as the case may be, the amount of corporation tax payable by the company for that accounting period shall be reduced by the amount so offset.

(13) In this section, ‘valid claim’ means a claim in relation to the credit which is made under and in accordance with this section and in respect of which all information which the Revenue Commissioners may reasonably require to enable them determine if, and to what extent, the credit is due to a company in respect of an accounting period, has been furnished by that company.

(14) In this section, a reference to an amount payable, in so far as the reference is in respect of the credit, shall be construed as a reference to any amount to be offset under section 960H pursuant to subsection (6)(a) or to be paid under subsection (6)(b), as the case may be.”.

(5) Subsection (4) applies in respect of accounting periods the specified return date (within the meaning of Part 41A) of which is on or after 23 September 2023.

(6) Section 25 of the Finance Act 2019 is amended by the deletion of subsections (2)(c)(ii), (4)(b) and (5).