The Government announced a scheme in Budget 2016 that would allow firms to halve the corporation tax paid on income as long as it was generated from research and development conducted here. Billed by some as a successor to the Double Irish, the so-called Knowledge Development Box was expected to cost around €50m a  year. But figures released by the Minister for Finance last week revealed that the cost to date has been just €5m, with fewer than ten companies availing of the scheme so far.

Ian Collins, head of research and development at EY Ireland, said the Knowledge Development Box was designed to further incentivise companies to do research and development in Ireland. It allows companies to halve the tax on their profits arising from qualifying intellectual property, which means their corporation tax rate falls to 6.25% from 12.5%. For the purpose of the scheme, qualifying intellectual property essentially boils down to patents and software, he added.

Mr Collins said there is probably a couple of reasons why more companies are not availing of the tax scheme. Firstly, when the scheme was brought in in 2016 it was given a two year time limit, so in effect, companies still have until the end of the year to make their first Knowledge Development Box claim. To this end, he said he is seeing a number of companies looking to assess the cost benefit of applying for the scheme.

Secondly - and perhaps more importantly - Mr Collins said the rules of the scheme are quite complex and they do require a bit of thought and documentation. There is also an element of fear among companies that if they do claim the tax, they will face heavy audits, he added. 

Companies can already avail of the research and development cash refund scheme, which sees companies get 25% of their R&D costs back in cash from Revenue. Mr Collins said the beauty of the Knowledge Development Box is that is actually complements that regime - you can only claim the Knowledge Development Box if you are already claiming the R&D tax credits. 

Other countries have their own Knowledge Development Box, or equivalent schemes, and Mr Collins said that some multinationals companies may have been attracted by these. But he added that the Irish Knowledge Development Box scheme was the first such scheme to comply with new international tax standards - a really important element to consider.

He also said the Irish Knowledge Development Box ranks very favourably with such schemes in other countries, but admits it could do with some changes including simplifying the rules to make them less daunting and offering clearer guidance on the documentation rules, while also aligning them more with existing R&D incentive schemes.

Mr Collins also pointed out the scheme is due to expire in 2020 and he said that while there is nothing to suggest that it won't be extended, some certainty would certainly help its take-up. 

MORNING BRIEFS - Growth in the services sector picked up pace again in April, rebounding from a slight slowdown in March as a result of Storm Emma. The Investec Services Purchasing Managers' Index hit its highest level in two years, with export orders seeing particularly strong growth as the euro eased against sterling and the dollar.

*** Dairy and ingredients company Kerry Group has announced a 3.7% rise in sales in the first three months of the year. In an interim management statement the firm said volumes at its taste and nutrition business rose by 4.3%, while its consumer foods division, which includes brands like Dairygold and Galtee, grew by 1.6%.

*** Electric car maker Tesla has posted a record quarterly net loss of $784.6m, as the company struggles to boost production of its mass market Model 3 car. Revenues rose 26% to $3.4 billion but the firm was only able to produce 2,270 cars a week by the end of April. It said it needs more than double that figure in order to become profitable.

*** Hotel group Dalata has said trading in the first four months of the year has been a little ahead of expectations, particularly at its Dublin hotels.

*** Overnight, the US Federal Reserve has held interest rates in the 1.5 to 1.75% range, though it reiterated its intent to raise rates later this year. The Fed said it expected a recent rise in inflation to be sustained, while it also expressed confidence in the health of the US economy. It has currently forecast two rate rises this year - with investors expecting the first of those to come at its next meeting in mid-June.