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Enhancing Ireland’s Smart Economy

27 May 2010

Finance Act 2010, introduced a number of provisions to improve Ireland's attractiveness as a location for holding intellectual property ("IP") and performing research and development ("R&D") activities. Taxand Ireland identifies what now makes Ireland so attractive for companies performing R&D activities.

The IP regime provides for a tax deduction by way of capital allowances on qualifying IP expenditure. The Finance Act has broadened the list of qualifying IP expenditure to include applications for legal protections (e.g. applications for the grant or registration of brands, trademarks, patents, copyrights etc) and computer software acquired for the purposes of commercial exploitation.

The Finance Act also enhances the IP regime to now allow pre-trading companies incurring qualifying IP expenditure to claim capital allowances on the expenditure when they commence trading. Companies will also now be able to claim allowances on qualifying IP where the IP has been impaired in an accounting period. This should be beneficial for sectors where IP is frequently rendered obsolete due to constant advancements within the business sector. A company claiming capital allowances on qualifying IP expenditure incurred after 4 February 2010, can now dispose of the IP after 10 years without suffering a claw back of allowances previously claimed. This claw back period has been reduced from the previously applicable 15 year holding period which applied.

The Finance Act introduces changes to the R&D tax credit regime whereby companies can adjust their threshold amount in certain cases (R&D expenditure incurred in a 1 year period to a date in 2003) when calculating their R&D credit.

Taxand's Take

The adjustment to the threshold amount will only apply to companies which incurred R&D expenditure in 2003 at different R&D centres where one of those R&D centres has now ceased for the purposes of a trade. The expenditure on the ceased R&D centre incurred in 2003 can now be excluded from the threshold amount which should increase the R&D credit available to companies going forward. Anti-avoidance provisions were also introduced to guard against any potential abuses of adjustments to threshold amounts. The Finance Bill also imposes an obligation on companies carrying on R&D activities at separate locations to keep separate R&D expenditure records for each R&D centre.

These new amendments should improve Ireland's attractiveness as a holding location for IP and for companies performing R&D activities.

Your Taxand contacts for further queries are:
Martin Phelan
T. +353 1 639 5139

Conor Bradbury
T. +353 1 639 5215

Taxand's Take Author