674. Deputy Pearse Doherty asked the Tánaiste and Minister for Finance the estimated cost of making the research and development tax credit payable to small and micro companies within 12 months. [55031/26]

The Research and Development (R and D) tax credit provides companies with a tax credit equal to 35 per cent of the qualifying expenditure incurred on qualifying R and D activities. The R and D tax credit, which was first introduced in 2004, is a broad measure available to companies within the charge to Irish tax who incur expenditure in the carrying on of qualifying R and D activities.

The R and D tax credit has been enhanced in recent Finance Acts, with key enhancements including an increase in the rate of the credit from 30 per cent to 35 per cent and the introduction of a new first-year payment threshold (FYPT).

The R and D tax credit is in general paid to claimant companies over three annual instalments of 50%, 30% and 20%, rather than in full at the time of claim. However, the FYPT allows for smaller claims, up to a certain threshold, to be payable in full in the first year, rather than payable over three annual instalments.

The FYPT was introduced in 2022, at the amount of €25,000. It was doubled to €50,000 in Finance (No.2) Act 2023 and further increased to €75,000 in Finance Act 2024 and to €87,500 in Finance Act 2025. An R and D tax credit of €87,500, at the current credit rate of 35 per cent, would equate to qualifying R and D expenditure of €250,000.

These enhancements to the credit are of particular benefit to companies engaged in smaller R and D projects and are intended to encourage more companies to avail of the tax credit. As such it is likely that many small and micro companies undertaking R and D would already be able to access their R and D credit in full in the first year, under the FYPT provision.

While advancing the payment of a credit is net neutral to the Exchequer over time, it does nonetheless incur a Budgetary cost in the year of acceleration. I am advised by Revenue that the Budgetary cost of making the full amount of the R and D tax credit payable in one instalment for small and micro-companies is tentatively estimated at being in the region of €72 million. However, it is noted that this estimate is based on R and D tax credit claims included on Corporation Tax returns for 2024 (the latest year for which data is available), a year in which the FYPT was €50,000. This does not factor in the subsequent increases in the FYPT to €87,500, therefore it could be expected that the cash-flow cost to the Exchequer would be below this amount. Detailed data for the 2024 R and D tax credit claims is not expected to be available until later this year, therefore it is not yet possible to estimate the impact of the increased FYPT on claims by small and micro companies.

It should again be noted that this cost is a cash flow cost and not an additional full year cost, as it does not entail any change to the overall amount of the credit. This estimate is based on R and D tax credit claims included on 2024 Corporation Tax returns, the latest year for which fully analysed data are available. The estimate assumes no behavioural change by companies claiming this credit.

I am further advised that Revenue cannot provide estimates for later years due to the unknown nature of the future tax base and future economic behaviour.