Nationally, Ireland has a well-developed ecosystem for funding research and development including grants, tax credits and the knowledge development box. Exchequer funding is a significant driver to industrial R&D often underpinning future BERD writes KPMG’s Ken Hardy and Damian Flanagan.
There is a variety of funding mechanisms for companies for research and development. Micro-enterprises can avail of feasibility studies or the agile innovation fund from the local enterprise offices (LEOs). SMEs with export potential can also access the agile innovation fund or the research and development fund from Enterprise Ireland.
For larger FDI companies, they can access feasibility studies and potential RD&I funding from the IDA. Levels of funding for feasibility studies are typically in the region of 50% while RD&I funding level varies is dependent on the type of company, location, and level of innovation.
Higher grant rates can be achieved for collaborative projects between companies and research teams in Higher Education such as innovation partnerships or innovation vouchers. In addition, the Disruptive Technologies Innovation Fund is a national €500m fund for the collaborative development of disruptive technologies in ICT, health and wellbeing, food, energy, climate action and sustainability, manufacturing and materials and business services and processes.
What are the EU funding mechanisms available?
The main EU funding mechanism is Horizon Europe. It has a budget of €95b for basic and applied research projects. Pillar II targets research specifically for Global Challenges and European Industrial Competitiveness and Pillar III promotes cooperation between academia and industry through partnerships and training programmes.
Within the funding ecosystem, R&D grants can be combined with the R&D tax credits (with some restrictions) to significantly reduce the cost of research and development. The research development tax credit is 25% credit on qualifying expenditure such as staffing costs, direct R&D costs and plant and machinery and buildings.
“If the research and development is successful and results in a computer programme or a patented invention (or patentable IP for SMEs) that generates profit. Then the knowledge development box can be used to reduce corporation tax from the qualifying profits from 12.5% to 6.25%”.
Are there any other funding measures available?
Nationally, Enterprise Ireland has the IP Strategy supports for companies to develop a strategy to manage and exploit IP coming from an RD&I project. This includes IP Start Grant for obtaining external expert IP advisory and support services to address immediate IP issues or the IP Plus Grant that helps companies to obtain external expert IP advisory support services and to build the in-company IP capability including implementing a detailed IP Strategy.
At the EU level, the LIFE programme is targeted at projects that develop and demonstrate innovative techniques and approaches related to environmental and climate action e.g. work that contributes to the shift to an energy-efficient, renewable energy-based, and climate-resilient economy or seeks to halt and reverse biodiversity loss.
Benefits of national/EU funding vs self-funding R&D
The benefits of national/EU funding for research and development include allowing companies to take on more challenging research that they would not typically support, particularly related to projects lower down the TRL scale, or indeed blue-sky ideas. Funding also enables companies to execute research and development faster by investing more money in resources.
In rapidly changing industries such as ICT, the speed of innovation can be critical to the long-term viability of the venture. Finally, collaborative research projects can enable access to the academic infrastructure and skills, nurturing future experts in a company’s specific industry.
For Ireland Inc, funding industrial research and development typically leads to the creation and sustainability of highly skilled jobs in the economy and is a key that we see in attracting FDI into Ireland.
What are the potential downsides?
In reality, grant funding comes with a number of trade-offs. Most R&D grant funding is prospective, technically prescriptive, and competitive. In rapidly changing industries, the prospective and technically prescriptive nature of the grants can often be a challenge to fully complete due to commercial pressures or technological advances.
The competitive nature of the funds often means that inexperienced applicants find the process daunting and ultimately unsuccessful. In addition, if successful, there is an administrative overhead for companies. Applications need to be prepared, collaborations formed, and drawdown completed.
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In KPMG’s R&D Incentives Practice, we have significant experience in identifying the right approach across the varied funding mechanisms and can add value to your R&D. Contact our team below to find out more. We'd be delighted to hear from you.