Reaping R&D Tax Credits from Sustainability Efforts

Origin Green Ireland Presentation

Derek Henry

28 November 2014

Agenda

1. Brief overview of the R&D Tax Credit

2. R&D potential within Sustainability related activities

3. Some Myths about the R&D Tax Credit Regime

4. Questions and answers

R&D Tax Credit RegimeBenefits

• Up to 37.5% reduction in certain costs

- 25% tax credit on the cost of qualifying activities

- On top of 12.5% corporation tax deduction for revenue expenditure

• Possible cash refund from Revenue

R&D Tax Credit RegimeFinance Bill 2015 Update

• Pre Jan 2015

- Base year fixed at 2003

- Reduced by €100,000 per annum in last number of Finance Acts

• Post Jan 2015 – Abolished

Page 5

R&D Tax Credit RegimeQualifying Activities

“R&D activities”

(i) basic research,

(ii) applied research,

(iii) experimental development,

Activity must:

(I) seek to achieve scientific or technological advancement, and

(II) involve the resolution of scientific or technological uncertainty.

Page 6

R&D Tax Credit RegimeMaking the Claim

• Self-assessment

• Technical Report

• Claims need to be made within 12 months of the financial year end

Page 7

R&D Tax Credit RegimeIssues faced by Clients

• Legal definitions versus practical application

• Finance function

• Engaging with technical staff

• Integrity of classification of activities

• Revenue scrutiny

Page 8

Sustainability Development Areas Potential R&D Activities?

Potential

Greenhouse gas emissions reduction

Energy conservation. E.g.

•Electrical energy reduction •Thermal energy reduction

Water usage reduction

Packaging / Waste reduction

Biodiversity

Community initiatives

Potential R&D Activities within Sustainability Development

• Material substitution or Experimentation with new materials

• Investigation and optimisation of existing process parameters and improvements to existing processes

• Investigations into various new manufacturing methods / sub-processes and integration of same into existing processes

• Packaging materials change or improvement

• Investigation into alternative uses for waste products (e.g. new product development)

Non R&D Activities

• Achievement of sustainability goals through standard methods (e.g. introduction of known techniques or existing ‘off the shelf’ solutions)

• Standard implementation of new Plant and Machinery into a new or existing process (i.e. use of a standard piece of machinery as it was intended to be used, with no modification to such machinery required)

• Routine biodiversity activities

• Community initiatives

Some Examples We Have Encountered

1. Greenhouse gas emissions- improvement of N efficiency while maintaining crop

yields

2. Energy conservation- design and implementation of a complex ambient control

system

3. Water usage reduction- waste water treatment, cleaning, mixing

4. Packaging and waste reduction- PVdc substitution due to regulatory changes

Potential Additional R&D Areas

• Development of new, or improvement to existing, products or processes in order to achieve an advance in a number of areas, including:

• Yield

• Cost

• Quality

• Stability

• Consistency

• Shelf life, etc.

Page 13

Some myths about R&D

We are not eligible for the R&D Tax Credit Regime if:

•Grants were received

•Failures occurred and we were unsuccessful

•Our activities would not be considered patentable

•We do not maintain ownership of the IP rights

•Note: This is NOT the case

QUESTIONS AND ANSWERS

Derek HenryHead of R&D Tax Servicesdhenry@bdo.ie01-4700211