The Finance Bill 2010, which is expected to be enacted on Saturday 3 April, introduces a number of provisions to further enhance Ireland’s attractiveness as a location for holding intellectual property (IP) and performing research and development (R&D) activities.
The IP regime provides for a tax deduction by way of capital allowances on qualifying IP expenditure. The Finance Bill has broadened the list of qualifying IP expenditure to include applications for legal protections (eg applications for the grant or registration of brands, trademarks, patents, copyrights etc) and computer software acquired for the purposes of commercial exploitation.
The Finance Bill also enhances the IP regime, allowing companies incurring pre-trading 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 clawback of allowances previously claimed. This clawback period has been reduced from the previously applicable 15 year holding period which applied.
The Finance Bill 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.
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.
This article has been authored by Conor Bradbury.
