Ireland treats capital spending on R&D in two ways. Plant and machinery used in R&D activities sits inside the main credit as qualifying expenditure, apportioned for other use. Buildings and structures have their own credit under section 766A, with a use test, an apportionment rule and a clawback if the building stops being used for R&D. This page covers both. Most of the other six countries exclude buildings altogether, so the Irish building credit is unusual and worth understanding for any company fitting out a laboratory or pilot facility.
What it is
| Element | Plant and machinery | Buildings and structures |
|---|---|---|
| Statute | Section 766 (within qualifying expenditure) | Section 766A |
| What qualifies | Expenditure on plant and machinery that qualifies for capital allowances and is used for R&D activities | Expenditure on the construction, or refurbishment, of a building or structure that qualifies for industrial buildings allowances and is used for R&D |
| Use test | Apportioned to R&D use | At least 35% of the building must be used for R&D over a 4 year period |
| Amount | The R&D proportion of the cost, in the year incurred | The R&D proportion of the relevant expenditure, by reference to the proportion of use |
| Rate | 30% (35% where the return filing date is on or after 23 September 2027) | Same rate as the main credit |
| Payment | In the three instalments | In the three instalments |
| Clawback | None specific; ordinary balancing rules | If the building is sold or ceases to be used for R&D within 10 years, the credit is clawed back |
Who it applies to
Plant and machinery. Any claimant with equipment used in the R&D: laboratory instruments, test rigs, pilot equipment, computers used by the R&D team. The expenditure must qualify for wear and tear allowances, which excludes land and most intangible assets, and must be apportioned where the asset is also used for production or other purposes. Software that is capital in nature follows the plant and machinery route.
Buildings. Companies constructing or refurbishing a laboratory, pilot plant or research facility. The building must qualify for industrial buildings allowances, which means it must be an industrial building such as a factory or a building used for a qualifying trade, and the company must own the relevant interest. Expenditure met by grants is excluded, as under the main credit.
How it works
- Identify the relevant expenditure on construction or refurbishment, excluding land and grant-funded amounts, and confirm industrial buildings allowances are available.
- Estimate the R&D use over the 4 year period, by floor area or another just and reasonable measure. It must be at least 35%.
- Calculate the credit on the R&D proportion of the expenditure at the applicable rate, and claim it on the Form CT1 for the period in which the expenditure is incurred, within 12 months.
- Receive it in instalments on the same basis as the main credit.
- Monitor the use for 10 years, keeping floor plans and usage records; if use falls or the building is sold, the credit is recovered.
- For plant and machinery, include the R&D proportion of the cost in qualifying expenditure for the year, with the asset register showing the use.
Worked example
Illustrative example. Avoca Materials Limited, a hypothetical company, spends €2,000,000 in its 2025 accounting period refurbishing a factory it owns: €1,400,000 on a new laboratory wing and €600,000 on a production area. The laboratory is 60% of the floor area and will be used wholly for R&D; the production area is not used for R&D. It also buys €300,000 of analytical equipment for the laboratory and a €200,000 machine used 25% for R&D trials.
| Item | Calculation | Credit at 30% |
|---|---|---|
| Building credit (section 766A) | Relevant expenditure €2,000,000; R&D use 60%, above the 35% test; credit on €1,200,000 | €360,000 |
| Analytical equipment | 100% R&D use; qualifying expenditure €300,000 | €90,000 |
| Shared machine | 25% R&D use; qualifying expenditure €50,000 | €15,000 |
| Total credit | €465,000, paid in three instalments |
If Avoca converted the laboratory wing to production in 2029, within the 10 year period, the building credit would be recovered.
Common questions
Does the whole building have to be used for R&D? No. At least 35% over the 4 year period, with the credit calculated on the R&D proportion.
Can we claim the building credit and capital allowances? Yes. The credit sits alongside industrial buildings allowances; Revenue's manual explains the interaction.
Is land included? No. Only construction or refurbishment expenditure qualifies.
Do we need to track use for the whole 10 years? Yes. Keep floor plans and occupancy records for the building, because the clawback turns on continued R&D use, and record any change of use as soon as it happens so the position can be regularised.
What about leased equipment? Lease payments are revenue expenditure and qualify under the main credit if wholly and exclusively for the R&D; the asset itself is the lessor's.
Related pages
Official sources
Educational content only, not tax advice. See the disclaimer.