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Ireland’s Innovation Compass Guides the Next Phase of R&D Growth

Ian Collins
Ian Collins

EY Ireland Tax Partner and Head of Innovation incentives

5 minute read 26 Feb 2026
Related topics
Tax

Ireland’s Innovation Compass outlines new priorities that expand R&D activity, strengthen incentives and support long-term investment.

In brief

  • Ireland’s Innovation Compass sets out clear areas that expand R&D activity, strengthen incentives and support long term investment across the economy. 

  • The Compass highlights opportunities for broader qualifying expenditure, smoother administration, deeper collaboration and greater support for high growth sectors. 

  • The framework provides a structured pathway for companies to advance research, build new capabilities and access practical support across the full R&D lifecycle.

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The Department of Finance has just published the Research and Development Tax Credit and Innovation Compass, (“the Compass”) which maps out a pathway on targeted areas to consider for both the R&D tax credit regime, and for tax supports on innovation.  The Compass identifies a number of measures that this Government will consider, with the objective of ensuring Ireland’s R&D supports continue to evolve in an ever-increasingly competitive global environment. 

 

The goals behind this are straightforward. Research and development supports high value work and highly skilled operations, which help companies build new capabilities, which in turn strengthens the broader economy. 

 

Ian Collins, EY Ireland Tax Partner and Head of Innovation incentives, sums up the moment clearly: “Encouraging greater levels of research and development (R&D) is one of the most powerful ways Ireland can continue to grow and strengthen the Irish economy and in this context it’s really positive to see the publication of the R&D Tax Credit and Innovation Compass by Government.”

 

There are a number of proposed measures flagged for further review to enhance the R&D ecosystem which can be broadly categorised as follows:

 

  1. Qualifying expenditure
  2. Capital expenditure
  3. Administration and simplification
  4. Innovation
  5. Knowledge Development Box

There is an acknowledgment of how the R&D tax credit system has evolved through significant enhancements over the past two decades, and it is refreshing to see a continued focus in this area to ensure the Irish proposition continues to be amongst the best in class when vying for both foreign direct investment and supporting the development of an innovation-driven domestic enterprise sector. 

 

There are a number of notable areas worth flagging in the report:

 

1. A Stronger Rate to Support LongTerm Investment

 

Ireland’s R&D tax credit is set at 30 percent for accounting periods beginning in 2024.  
This credit will increase to 35 percent for accounting periods beginning on or after 1 January 2026, which represents a significant return for companies investing in R&D activities, and compares extremely favourably to many other jurisdictions, which should enhance Ireland’s competitive proposition. The Compass sets out the proposed areas the Government intends to review with a view to enhancing the regime further, including qualifying expenditure, capital investment, simplification and innovation supports.

Raising the R&D tax credit to 35 percent gives businesses more funding to invest in new ideas, hire talent and expand long term research plans.

2. What does R&D actually include in 2026

The Compass lists qualifying expenditure as one of the main pillars for future development. Businesses are now working in areas like AI, quantum technologies and next generation materials. Updating what’s encompassed by the term R&D so it captures these activities and reflects modern business models would allow more innovative work to qualify.  

In short: expanding the definition of R&D brings more real world innovation into the credit, giving companies support for a wider range of projects.

3. Clearer Space for Industry–Academia Collaboration

The Compass points to supports for innovation as a future focus. Many companies depend on universities and research centres for specialist work, equipment and talent. Easing the limits around collaboration would create more shared projects and more learning opportunities for students and researchers.  

In short: easier collaboration with universities gives companies access to specialist skills and equipment that strengthen their research projects. 

4. Updated Rules for Outsourcing and Global Research Teams

The Government has already begun looking at subcontracting measures, as confirmed in the Compass. Research rarely happens in one place or through one organisation. Many projects draw on multiple labs, specialist partners and global teams. Ireland’s rules should evolve to reflect this pattern and ensure companies can carry out full programmes while keeping meaningful value here.  This is especially relevant for multinational research networks which draw on talent and skills within their global network.

In short: more flexible rules for outsourcing should be considered to let companies use the best labs and teams, wherever they are, while still keeping strong value and seniority in Ireland. 

5. Better Cashflow for SMEs

The Compass places administration and simplification at the centre of its future plan.  
Simpler steps and faster repayment timelines would give smaller firms the room they need to hire, experiment and keep projects moving without delay. 

In short: smoother administration puts cash back in the hands of small firms quicker when they need it most. 

6. A More Joined Up System

Ireland’s R&D support system spans several agencies as well as the tax credit. The Compass’s focus on simplification creates an opportunity for a more coherent landscape.  A linked, predictable process would help companies spend more time researching and less time dealing with paperwork. https://www.gov.ie/en/department-of-finance/press-releases/tánaiste-and-minister-for-finance-simon-harris-announces-the-publication-of-the-research-and-development-tax-credit-and-innovation-compass/

In short: one clear system helps companies focus on real research versus admin. 

7. Support for New and Fast Growing Sectors

The Compass sets the stage for future development of innovation supports.  
This opens new opportunities for areas like decarbonisation, clean energy, digital transformation, to name but a few. These fields are growing quickly, attracting investment and opening new market opportunities. 

In short: stronger support for fast growing sectors helps companies tap into new markets and build products to meet rising demands.

A Steady Path Forward

Ireland now has a roadmap that brings clarity and direction. The Compass provides a structure for steady progress, and the opportunities to build on that structure are strong:

  • A competitive R&D credit rate
  • Broader coverage for new and emerging technologies
  • Easier collaboration between companies and universities
  • Updated outsourcing and related party rules to reflect modern R&D operating models
  • Better cashflow support for SMEs
  • A simpler, cohesive R&D ecosystem
  • Stronger backing for high potential sectors

A little less conversation.

As always, now it’s a matter of maintaining momentum and putting the building blocks in place for a better future. 

This is a pivotal moment for companies to build on what the Government has set in motion. 

EY’s innovation incentives team helps companies get real value from their research work and capital projects. The team brings tax specialists, engineers, scientists, industry practitioners and chartered quantity surveyors to the table, giving clients practical support across the full cycle. That includes handson R&D workshops, feasibility sessions, writing up project detail, developing grant ideas, preparing Knowledge Development Box claims, building strong capital allowances files and supporting Revenue audits when needed.

If you want experienced hands beside you on your R&D or capital projects, connect with EY and start the conversation.

Summary

Ireland’s Innovation Compass sets out clear areas to strengthen R&D activity, expand qualifying work, simplify processes and support emerging sectors. The roadmap outlines higher credit rates, broader definitions, smoother administration and greater collaboration opportunities. It gives companies a structured path to invest, build new capabilities and progress long term research with practical support across the full R&D lifecycle.

About this article

Ian Collins
Ian Collins
EY Ireland Tax Partner and Head of Innovation incentives
Strong advocate for health and well-being. Deals with Irish Revenue on matters related to the Irish R&D tax credit regime.
Related topics
Tax

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