In order to claim the credit for costs incurred by a claimant company in engaging a subcontractor to carry of R&D activity on its behalf, the claimant company must notify the sub-contracting party in writing that they may not make a claim for the R&D credit for these purposes.
Where the outsourced activity is undertaken by a person who could not claim the R&D tax credit (for example an individual, or by a non-resident 3rd party which does not have a branch in Ireland), then Revenue will accept that a notification is not required in these cases.
The purpose of the notifications procedure is to eliminate a situation where two different companies are claiming the R&D tax credit for the same costs.
Companies planning to claim subcontractors costs as part of their overall R&D tax credit claim must notify subcontractors in advance of every payment or on the date the payment is made. There is no prescribed notification document or method, but a record of this notification should be maintained (e.g. email correspondence).
Failure to notify subcontractors in advance of every payment may result in Revenue seeking to disallow some or all of the outsourced R&D expenditure included in a company’s R&D tax credit claim.
If you have any questions in relation to the above, or if you would like to discuss this topic further, please contact a member of the Mazars private client team below.