Keep records made at the time that show the scientific or technological uncertainty, the work carried out to resolve it and the expenditure incurred. Revenue's Tax and Duty Manual says the same thing at greater length, and its audits apply it strictly: a claim is tested on documents that existed when the work was done, and a report written for the claim is a guide to those documents, not a substitute. This page sets out what Revenue expects, what to keep, how to tie it to the Form CT1 and where claims fall down.
What the tax authority expects
There is no prescribed record. The general obligation to keep records sufficient to make a true return, for 6 years, applies. For the R&D credit the manual sets out what Revenue will ask for under each test: for the science test, documents showing the state of knowledge at the start, the scientific or technological uncertainty, the hypotheses, the experiments or investigation and the results, created as the project progressed; for the accounting test, records tying each item of expenditure to the activities and showing how staff time and shared costs were apportioned. Revenue also expects the company to be able to produce a competent person who can explain the project to an independent expert.
Two features of Revenue's approach shape the records. First, Revenue may appoint an external expert to assess the science test, so the technical records should be comprehensible to a specialist outside the company. Second, Revenue reconciles the claim to the statutory accounts and the payroll, so the project costing must agree with the ledger.
Records to keep during the year
| Record | Shows | Kept by | When |
|---|---|---|---|
| Project initiation note | The field, the state of knowledge, the advancement sought and the uncertainty | Technical lead | At the start |
| Hypotheses and experiment plans | The systematic approach | Technical lead | Before each iteration |
| Laboratory notebooks, test logs, design iterations, version control | The work done and its results, including failures | Scientists and engineers | As the work happens |
| Milestone and closing reports | Conclusions, and the point at which the uncertainty was resolved | Technical lead | At milestones and at the end |
| Timesheets by project | Staff time on qualifying activities | All staff whose emoluments are claimed | Weekly |
| Payroll records | Emoluments, employer PRSI, pension | Payroll | Monthly |
| Invoices, contracts and subcontractor notifications | Subcontracted and third level costs, the written notice to subcontractors, location of the work | Finance | At engagement and payment |
| Grant agreements | Expenditure met by grants, to be excluded | Finance | On signing |
| Asset register | Plant and machinery used in R&D and the proportion of use | Finance | Monthly |
A project note written in January that names the uncertainty is worth more than a report written the following September that explains how clever the solution was. Agile teams can meet the standard with tagged tickets, commit histories and sprint reviews that record what was learned.
Linking records to projects and costs
The Form CT1 reports totals, not projects, so the link is made in the company's claim file. For each project, the file should hold:
| Item | Content |
|---|---|
| Project | Name, field of science or technology, dates, competent persons |
| Science test analysis | The category (basic, applied or experimental development), the advancement sought, the uncertainty, the systematic investigation, with pointers to the records |
| Staff costs | Employee, time apportionment, emoluments, PRSI and pension, source of the apportionment |
| Subcontracted and third level costs | Provider, contract, location, notification letter, cap calculation |
| Plant and machinery | Asset, cost, R&D use percentage |
| Materials, software and direct overheads | Items, apportionment, the wholly and exclusively reasoning |
| Exclusions | Grants deducted, excluded activities, costs after the uncertainty was resolved |
| Reconciliation | Project totals to the CT1 figures and to the accounts |
Common gaps
- Reports written after the fact. A narrative without contemporaneous records behind it fails the science test in a Revenue audit.
- No statement of the uncertainty at the outset. Projects described by their commercial goal.
- Time apportionments without timesheets. Round percentages set at year end.
- General overheads claimed. Rent and administration are not wholly and exclusively on R&D.
- Grants not excluded. Enterprise Ireland or IDA funding of the same costs left in the claim.
- Subcontractors not notified. The written notice to unconnected subcontractors missing.
- No competent person available. The engineer who did the work has left and nobody can explain it to Revenue's expert.
Illustrative example
Illustrative example. Corrib Materials Limited, a hypothetical company, develops a biodegradable packaging film. Its technical director's note from the start of the project records that no commercially available film combines the required barrier performance with composting in 90 days and sets out the hypotheses to be tested. The lab notebooks record each formulation and its test results; timesheets code 65% of three chemists' time to the project; finance codes materials and a university testing agreement to it and excludes the Enterprise Ireland grant. When Revenue opens a Level 2 intervention two years later and appoints an expert, Corrib hands over the project file and the technical director walks the expert through the notebooks. The claim is agreed as filed.
Related pages
Official sources
Educational content only, not tax advice. See the disclaimer.