Leyton Ireland - No changes to R&D Tax Credits Announced in 2011 Budget

No changes to R&D Tax Credits Announced in 2011 Budget

09/12/2010

No changes to R&D Tax Credits Announced in 2011 Budget

The much anticipated 2011 Budget Speech took place yesterday and many of the key measures have already been passed by the Dail. In the Minister’s speech, no specific measures regarding the R&D Tax Credit were introduced. Given the economic backdrop to the Budget, one could be forgiven for thinking that the retention of the R&D Tax Credit in its current state was a successful outcome; however, this is not necessarily the case. Failure to enhance our R&D Tax Relief offering may cause companies to question this country’s seriousness about repositioning itself as a global innovation hub.

In the recent National Recovery Plan the Government clearly stated the importance of re-inventing this country as the location of choice for innovative companies engaging in Research and Development activities. This represents Ireland’s best opportunity to stabilise the economy and create sustainable economic growth into the future. Therefore, it is disappointing that theGovernment has not taken action that would deliver this.

Eoin Brennan, Consulting Manager at Leyton comments, “We were hopeful that the Government would use this Budget to put their words into action through the introduction of positive, ambitious measures that would act as a stimulus for activity in this sector. Enhancements to the current R&D Tax Credit regime would have made such an impact. However, this has not happened. In the meantime, other countries are consistently developing and enhancing their R&D tax relief incentives. In failing to do the same, Ireland runs a real risk of losing competitiveness and getting left behind in attracting and retaining the type of companies that could play an integral part in this country’s economic recovery”.

The message this country wants and needs to send is confused further by the removal of the exemption for patent royalty income introduced in yesterday’s budget.

Eoin Brennan, Consulting Manager at Leyton adds, “In our pre-budget submission we made a number of recommendations, each of which we believe would lead to increases in the level of R&D activities undertaken in this country. The benefits to the economy of introducing these measures would greatly outweigh their cost. Indeed one recommendation (i.e. introducing changes so that all companies can take the R&D Tax Credit “above the line”) could have a significant, positive impact at no cost to the exchequer. We need to act now”.

The Minister restated in his speech yesterday, the importance of its 12.5% Corporation Rate to this country, and its commitment to protecting this rate. However, a low corporation tax rate alone is not enough to ensure that levels of Foreign Direct Investment into this country are maintained and increased. This is easily replicated by other countries. Instead, we need a cohesive, holistic set of tax measures that will give us a long term competitive edge in bringing these companies to Ireland and ensuring they stay. An enhanced R&D Tax Credit regime would be one such measure.

Leyton are hopeful that the Finance Bill next year will be used to introduce measures, such as those set out in their pre-Budget Submission, which will put Ireland to the fore internationally in terms of our R&D Tax relief offering and set us on the path to economic recovery.

For further information on the above, feel free to contact the team.

All the latest news Previous | Next