The Department of Finance has now published the Research and Development Tax Credit and Innovation Compass, first signalled in Budget 2026. The document sets out how Government is thinking about the future of Ireland’s R&D tax credit and wider innovation supports over the medium term.

The stated aim of the Compass is to keep Ireland competitive for high‑value innovation and skilled employment, while aligning the tax system with how modern R&D is actually carried out. It takes feedback from last year’s consultation and groups future work into four main areas: qualifying expenditure, capital expenditure, administration and simplification, and supports for innovation.

Outsourcing and subcontracting are clearly on the agenda. The Compass confirms that work has already started on looking at subcontracting measures, with a view to better matching current industry practice where companies rely on specialist external partners, group R&D centres and contract research organisations. It also signals further analysis of the scope of qualifying expenditure and capital expenditure, including how certain lab, pilot plant and other R&D‑related capital costs should be treated.

On the administrative side, the Compass highlights simplification as a priority. Areas flagged for future work include accelerated repayments, clearer interaction with preliminary corporation tax, and a more transparent, user‑friendly regime. Under “supports for innovation”, the document notes that while the core R&D tax credit will remain focused on genuine R&D, Government will explore other tax‑based tools or supports for innovation activity more broadly, instead of simply widening the credit itself.

Taken together with the recent rate increase to 35%, the higher first‑year payment threshold and the new 95% staff rule, the Compass gives businesses a clearer view of where Ireland’s R&D regime is heading over the next few years. The direction of travel is broadly positive for innovation‑active companies, but it also underlines that rules on areas like subcontracting and qualifying costs may evolve, and that simplification will be an ongoing process rather than a single change.

ABGi Ireland is reviewing the Compass in detail and will continue to update clients as specific measures move from “under consideration” to legislation. In the meantime, if you have any questions please get in touch with ABGI Ireland. We can help you understand how the themes in the Compass, especially around outsourcing, eligible spend and repayment mechanics, might affect your current claims and future projects, so you can plan ahead rather than react after changes are enacted.