Ireland

Sample research & development (R&D) tax credit calculation 

Game Developers Limited began conducting R&D into new games platforms in the year ended 31/12/2010. The company had once developed a new rendering application in 2003, which was also considered R&D. No other R&D work was ever undertaken by Game Developers Ltd.

 

Game Developers Ltd calculated its R&D tax credit for the year ended 31/12/2010 as follows:

 

Game Developers calculate their R&D tax credit for the year ended 31/12/2010 as follows:
R&D salaries €250,000  
R&D plant & machinery* €150,000  
R&D overheads €150,000  
Eligible spend €550,000
Less R&D grant -€100,000
Less base year spend (2003) -€150,000
Incremental spend €300,000
25% R&D tax credit €75,000


 

If Game Developers Ltd had a corporation tax liability of €100,000 in the year ended 31/12/2010, it should be able to offset its R&D tax credit as follows:

 

Corporation tax liability €100,000
Less R&D tax credit €75,000
Corporation tax due €25,000


 

If Game Developers Ltd did not pay corporation tax in the year ended 31/12/2010, it should receive an R&D tax credit in the form of cash payments from Revenue over the next 3 years as follows (on the basis that the company is also not paying corporation tax for the years ended 31/12/2011 and 31/12/2012, and assuming its pay roll tax liabilities for 2010 was at least equal to the €75,000 R&D tax credit):

 

Games platform project 1
Year ended 2010 €25,000
Year ended 2011 €25,000
Year ended 2012 €25,000
Total cash benefit €75,000

 

Please note that the above example is for illustrative purposes only, and professional advice should be sought prior to submitting a claim.

 

You can try KPMG’s free online R&D tax credit assessor to help determine whether your company may be eligible for the tax credit.