Tax expert John Burke tells us why Ireland’s popular R&D tax credit could be significant for the country’s future.
Ireland’s research and development (R&D) tax credit is one of the most powerful tools in our tax system for driving innovation. For start-ups and scaling tech firms, it can be the difference between an idea staying on the whiteboard and becoming a market-ready product.
From 1 January, the credit has risen from 30pc to 35pc, following an increase from 25pc just last year. This is more than a tax tweak – it’s a signal that Ireland wants to double-down on innovation and position itself as a global hub for technology and knowledge-based industries.
Ireland’s tech ecosystem has grown rapidly in recent years, with homegrown start-ups in AI, fintech and deep tech attracting international attention. Yet early-stage founders often face a funding gap between seed and Series A. The R&D tax credit helps bridge that gap by injecting cash flow at a critical stage, enabling teams to hire engineers, accelerate product development and compete globally.
But as the incentive grows, so too does the challenge: how do we protect the integrity of the system while ensuring it continues to fuel genuine innovation?
A lifeline for start-ups and scale-ups
The R&D tax credit allows companies engaged in qualifying R&D activities – such as developing new software platforms, AI-driven solutions, or advanced engineering processes – to claim a percentage of eligible expenditure as a cash refund rather than a tax offset. For early-stage tech firms, this feature is critical; it provides liquidity at a time when cash flow is tight and venture funding may be uncertain.
The popularity of the incentive has surged. Revenue figures show claims rose from 1,629 in 2021 to 1,804 in 2023 – the highest on record. Over the same period, the cost to the Exchequer almost doubled, climbing from €753m to €1.407bn. These numbers underline the regime’s importance but also highlight the need for strong governance to ensure every euro spent delivers real innovation and long-term economic value.
Lessons from the UK: a cautionary tale for tech founders
The UK’s experience in this area offers a warning. Fraudulent and erroneous R&D claims have cost its economy billions, with HMRC estimating losses of around £4bn between 2020 and 2024. Many of the cases investigated showed activities that barely resemble R&D. The fallout has included criminal prosecutions, reputational damage and a regulatory crackdown that forced advisory firms out of the market.
For founders, this matters because investor confidence is tied to the credibility of the ecosystem. If a regime becomes associated with abuse, then capital providers hesitate, valuations suffer and legitimate innovators pay the price.
Ireland is not immune. As the credit becomes more attractive, new players may enter the advisory space – some less scrupulous than others. Revenue is already stepping up oversight, with practitioners reporting a four to fivefold increase in reviews of R&D claims year on year. For tech founders, this means compliance is not optional, but mission-critical.
Safeguarding the R&D tax credit
For companies, the message is clear: document everything, seek reputable advice and avoid stretching definitions of R&D. Incorrect claims can lead to penalties and reputational damage – risks that no start-up can afford.
For policymakers, proportionate measures are needed to protect the regime without stifling innovation.
Ireland could learn from the UK by requiring companies to submit a report of the R&D activities underpinning each claim at the time of filing. As part of the R&D tax credit claim process, a disclosure section – asking whether the claim was prepared internally or with professional advice, and if so, by whom – could also be factored in.
Finally, Revenue should issue clearer, more practical guidance with real-world examples relevant to tech and software development, reducing ambiguity and helping founders navigate compliance confidently.
Looking ahead
The increase to 35pc is a strong signal that Ireland wants to be the best place in Europe to build and scale innovative businesses. For tech founders, this is an opportunity to invest in the future – but with responsibility. If the balance between incentive and integrity is struck, the R&D tax credit can remain a cornerstone of Ireland’s innovation ecosystem and a catalyst for the next generation of global tech leaders.
Ireland is competing with other innovation hubs – from London to Amsterdam to Stockholm – for talent and investment. A robust, well-governed R&D regime will not only attract start-ups but also anchor high-value jobs and research here at home. Done right, this is more than a tax credit; it’s a strategic lever for Ireland’s tech future.
By John Burke
John Burke is a tax director at Forvis Mazars in Ireland. He specialises in tax incentive claims, particularly around R&D, for clients in fields such as software development, food science and fintech.
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