Category Archives: Blog

Does Your New Product Have SR&ED Eligibility?

The Scientific Research and Experimental Development (SR&ED) tax credit is a great source of R&D funding for companies in Canada. However, what is considered “innovation” according to the Canada Revenue Agency is often misunderstood. This misunderstanding can be very costly for companies, as attempting to claim projects that are not eligible can cause them to give up on subsequent projects that are eligible.

The Canada Revenue Agency is clear in its SR&ED eligibility requirements that a new product is not necessarily considered SR&ED. In fact SR&ED is not fundamentally about new products. It is fundamentally about achieving technological advancement. To quote the CRA: “novelty, innovation, uniqueness, feature enhancement, or increased functionality alone does not represent or establish technological advancement.”

If technological advancement is key to claiming SR&ED, what does it look like?

New products which require technological advancement to create them would hit the mark and meet the CRA’s SR&ED requirements. This means that when a new or improved material, device, product, or process is created, it must demonstrate technological advancement.

To prove this, “the advances in technology that are being sought should be distinguishable from the benefits of the new or improved material, device, product, or process.” The CRA will look for, “technological advancement (that) moves the technology base or level of a company to a higher level through an increase in the understanding of technology”.

In other words, a SR&ED project is one that adds technological knowledge to the organization – in the form of principles, techniques or concepts which were previously unattainable.

So the factors that companies often mistake for “innovation” in regard to the SR&ED interpretation of it, are not guiding principles. Even the success or failure of the work is not relevant to its eligibility for SR&ED. For SR&ED innovation, technological advancement is the true litmus test.

A new product SR&ED example

In its draft document providing guiding examples of SR&ED, the CRA gave the following example, paraphrased here, of a how a new product may or may not be eligible for SR&ED.

The example takes the case of a company which makes a carrot peeler with a glow-in-the-dark handle, which is a new product, but doesn’t challenge any technological uncertainty. When the company redesigns the handle, however, to improve ease of use, it has to experiment with manufacturing processes using new plastics. The experimentation with new materials and manufacturing processes to create the desired outcome proves to qualify as technological advancement and hence qualifies as SR&ED.

About Enhanced Capital Recovery

Enhanced Capital Recovery is an industry leading SR&ED consulting firm. Our goal is to assist companies to truly understand what SR&ED is, what areas in your organization may be eligible under the program, and then assist you through the entire process.

Please contact us for a free, no obligation consultation today!

R&D Tax Credits in Life Sciences & Biotech

When a new product or industry breakthrough occurs, it is clear that innovation has occurred. However, when it comes to R&D tax credits in Canada, such as SR&ED, the definition of innovation is much broader – inclusive of incremental advancements. These are often overlooked.

The question is, “Is your company one of many who are missing the opportunity claim R&D tax credits?”

Find out which R&D tax credits in life sciences & biotech are available. We’ll show you what type of companies can claim SR&ED, as well as some examples of projects that would qualify.

Maximizing your companies’ SR&ED tax credits is best supported by an expert in the field. SR&ED consultants help companies maximize their R&D tax credits and ensure that projects are submitted according to the CRA’s guidelines.

Who is already claiming SR&ED?

In the field of Life Sciences and Biotechnology R&D tax credits are available to a range of companies, including contractors such as analytical laboratories, contract research laboratories or contract manufacturing organizations. Examples of types of companies already claiming include:

Biotechnology – Biological Product Manufacturers
Pharmaceutical – Pharmaceutical and Medicine Manufacturers
Nutraceutical – Producers of isolated nutrients, dietary supplements and herbal products
Medical Equipment and Supplies Manufacturers
Electro medical and Electrotherapeutic Apparatus Manufacturers
Biotechnology & Life Sciences R&D Facilities

Project examples that are SR&ED eligible

Has your company conducted pre-clinical or clinical studies, devised new analytical methods or instruments in the process of conducting business? Much of this activity, which is often perceived by organizations as routine work, could be SR&ED eligible.

Here are some basic projects from previous SR&ED claims that are typical examples of SR&ED eligible projects in Life Sciences and Biotechnology industries:

Creating new or enhanced manufacturing processes
Developing or enhancing existing tools or devices
Developing a new or improved cultivation of plants
Conducting breeding programs which modify organisms
Developing computer programs
Developing green technologies
Advancing bioinformatics from living organisms

How we can help

Our experienced SR&ED experts at Enhanced Capital Recover will be able to identify all of your eligible projects and assist you in recovering SR&ED tax credits to which you are entitled.

Even if you currently complete your own R&D tax credits application, our experts will be able to validate and optimize your scientific descriptions as well as your eligible expenses. We will assist you in maximizing your return on investment while minimizing the risk of audit by Revenue Canada.

With our contingency based fees, we completely eliminate the risk of making a claim. We do the work up front and only get paid when your refund is secured. Contact us today for a free, no obligation consultation.

Are you a SR&ED expert? Take the Test!

How well do you know the fundamentals of the Scientific Research and Experimental Development tax credit (SR&ED)? Would you consider yourself a SR&ED expert?

Here’s a pop quiz to give you an indication of how well you know this R&D funding tool.

1. Can a company apply for both Provincial and Federal SR&ED?

2. Must research and development efforts be successful to claim SR&ED?

3. If a SR&ED claim is reviewed by the CRA, does that mean a full tax audit of the company?

4. How does the Industrial Research Assistance Program (IRAP) compare to SR&ED?

5. What are the most substantial costs related to an R&D project that are eligible for SR&ED?

6. How is scientific research and experimental development defined?

Answers

Find out how you did!

Yes. Most Canadian provinces and territories offer R&D tax incentives at a provincial level. Our services include application for both the Federal and Provincial SR&ED programs.
No. Properly documented projects, even if unsuccessful in achieving the desired result, can qualify for SR&ED. The key is to meet the technical objectives of SR&ED and follow a scientific methodology.
It’s important to keep in mind that a review of your SR&ED claim does not trigger a full tax audit. A SR&ED review is an isolated review of the claim only. Although SR&ED claim reviews are becoming increasingly common, as long as you understand the process and document your claim properly, there is no reason to be concerned about a review.
IRAP and SR&ED are both valuable R&D funding tools which can, in some cases, be used in tandem. SR&ED is a refundable tax credit program which can be claimed after R&D expenditures have been made. IRAP is a non-repayable grant of up to $1 million, but generally ranges from $10,000 to $250,000.
Wages and salaries directly attributable to SR&ED projects are normally the most significant eligible project costs. Therefore it is necessary for start-up and other small enterprises to set up their accounting processes to qualify for SR&ED.
Company Executives often think that the definition of scientific research and experimental development is quite narrow. In fact, the definition is deliberately broad in an attempt to foster innovation in a number of ways. For many businesses, eligible projects are often in the form of experimental development. An owner of a sporting goods shop who improved a point-of-sale system to track online sales, or a commercial fishery that developed a better canning process might both qualify.

In general, the federal government provides SR&ED tax incentives for three types of research:

Basic research undertaken for the advancement of scientific knowledge without a specific practical application in view;
Applied research undertaken for the advancement of scientific knowledge with a specific practical application in view; and
Experimental development undertaken for the purpose of achieving technological advancement for the purpose of creating new, or improving existing, materials, devices, products or processes, including incremental improvements

About Us

Enhanced Capital Recovery’s goal is to assist companies such as yours to truly understand all R&D funding options available, what areas in your organization may be eligible, and to assist you through the entire process. Contact us for a free consultation today!

SR&ED Examples; Is your company missing out on R&D Funding opportunities?

Recent news of more than 50 new technology and innovation companies going public on TSX/TSXV since the start of 2014 shows that tech and innovation is thriving in Canada.

But the good news about Canadian innovation has been appearing across many industries including: manufacturing, agribusiness, sustainable energy development, software development and more.

Canada’s thriving growth in innovation is in part attributable to the research and development support available. The scientific research and experimental develop program (SR&ED), the largest and best known example, is a generous R&D tax credit incentive offered by the Federal Government of Canada. The program pays more than 20,000 eligible Canadian Controlled Private Corporations in excess of $3 Billion CDN each year.

The question is, is your company one of over 58% of companies who are not taking advantage of R&D funding opportunities?

In this article, we will demonstrate the results of taking advantage of the opportunities available through two recent SR&ED examples.

Sustainable Energy

Sustainable energy is an industry that by its very nature is constantly looking for ways to innovate. Our example is about a company that created a different version of a windmill, and in the process, generated $245,000 in SR&ED funding.

What was different about this windmill is that it used sails instead of blades used in traditional windmills to generate power. These sails collected more wind than blades thereby generating more power. Further power generation was achieved by putting solar panels on the frame of the windmill.

To create additional revenues, the new technology allowed the company to incorporate paid for advertising on the sails, which was readable from short and long distances.

This windmill company was able to successfully claim SR&ED based on their employee’s salaries who were involved in the R&D, the subcontractors they hired to help with design, engineering, renewable energy certifications, all of their prototyping costs, and the cost of materials consumed or transformed.

As the company continues to develop larger sized windmills, and to improve the sails / solar panels performance, they will be able to claim SR&ED on an ongoing yearly basis.

Agribusiness

Agribusiness is another industry which shows a constant influx of innovation through research and development activity. A greenhouse sod company was able to obtain $130,000 in SR&ED funding by coming up with a new way to grow sod, which was easier to water and fertilize while it was being grown, and easier to harvest when ready for sale.

The advance in technology which allowed for growing sod in this manner, was based on a patented method of growing the grass on plastic, instead of on soil. The plastic made it every quick and easy to peel the grass off the plastic instead of the standard harvesting methods used by traditional soil sod farms. In addition water and fertilizing was much easier, quicker and required less product, because the sod was grown on off-ground racks.

This sod farm was able to successfully claim SR&ED for their employee’s salaries who were involved in the R&D, the subcontractors they hired to help with design, engineering, environmental certification, all of their prototyping costs, and the cost of materials consumed or transformed.

SR&ED will continue to be claimable every year as they test different types of plastics, growing racks, water / fertilizer combinations, and the growing of other things in addition to sod.

Get Started

Enhanced Capital Recovery can help you maximize your research and development funding opportunities and explore all possible avenues. Contact us today for a free consultation!

Why Wait for a Tax Credit | Get SR&ED Financing

Are you waiting for your SR&ED refund so you can reinvest the cash into further innovative projects or hire new people?

SR&ED tax credits are an amazing tool for funding your R&D projects, but there can be a significant delay between the time of your expenditures and receiving the tax credit. If your company is eligible for SR&ED and would benefit by receiving the funding sooner, there are financing programs available to bridge this time gap.

Maintain your company’s cash flow

These programs, called Tax Credit Financing, are designed to bridge the time gap between applying for Federal or Provincial tax credits and receiving the funds.

The amount you borrow is based on your R&D or other tax credit‑related expenses in a given fiscal year, up to $250,000.

Flexible repayment options

Depending on the financing program, several options can be available for repayment. When you receive your refund, you can choose to reduce your debt or it can be converted into a 36-month term loan and use your money for other business needs, such as funding growth projects, buying equipment or stepping up your marketing efforts.

Typical benefits and features of financing SR&ED claim:

No capital payments while you wait for your refund
No penalty for paying off your loan in part or in full at any time

Not sure if you have eligible research and development tax credits?

Enhanced Capital Recovery is here to help you determine if your company is eligible for tax credits or any other R&D funding sources available. We will provide a free consultation to do this – in fact you never pay for our consulting service unless we provide results.

Our goal is to assist companies such as yours to truly understand what SR&ED is, what areas in your organization may be eligible under the program, and then assist you through the entire process.

We’re experts in the field of R&D funding in Canada – let us take care of the details while you focus on your business.

Contact us today for a no-cost consultation

Are you launching a tech startup?

There’s never been a better time to launch a tech startup company in BC. Only a decade ago, a tech company would have to search far and wide to find the supports it needed to get off the ground. Now there are 25 accelerators in BC alone.

If you are launching a tech startup, you need all the help you can get. This article aims to inform you what you need to know about accelerators, as well as other R&D funding opportunities that you should not overlook.

How can an accelerator help you?

Accelerators, also known as incubators, typically offer low-cost office space, access to tools and equipment, as well as proximity to other start-up leaders. In addition, some will invest in start-up companies or provide mentorship networks and organize funding events to draw investor interest. A good example of this is the Cascadia Summit, an event organized by the Launch Academy incubator in Vancouver.

Are accelerators effective?

The jury is still out on the effectiveness of start-up accelerators. However, if you read tech news you will notice a trend of articles about tech companies whose successful launch included a beginning at an accelerator. Companies cite a number of advantages to working at accelerators, including a quicker path to understanding the causes of business pitfalls through good coaching and advice, as well as help identifying the most appropriate target markets.

The other side of the story is that it’s hard to define what success looks like for an accelerator program. The fact remains that a large percentage of tech start-ups fail. A Start-up Genome report by Stanford University and University of California Berkeley which analyzed 3,200 early stage tech companies found that over 90% ended in failure. The causes? Rather than competition, failure was mostly due to internal problems like premature scaling, or hiring too many people too soon, as well as focusing on acquiring users before the product has been through enough testing.

What are the top funded accelerators?

Recently a couple of accelerators topped the lists of Federal funding recipients with the mandate to match the funding on a one to one basis: The BC Technology Industry Association (BCTIA), which received $10.4 million and Wavefront Wireless Commercialization Centre Society, which received $9.5 million.

How many accelerators are there in BC?

There are a number of other accelerators in BC including the following:

Accelerate Okanagan
Accelerate Tectoria, VIATeC
Centre4Growth, BCTIA
Discovery Parks
entrepreneurship@UBC
entrepreneurship@UVic
Foresight Cleantech Accelerator
GreenTech Exchange, SFU
Highline
Innovation Central Society
Innovation Island
Institute B
Invoke Labs
Kamloops Innovation Centre
Kootenay Association for Science & Technology
Kootenay Rockies Innovation Council
Launch Academy
New Ventures BC
SFU TIME Ventures
Spring Activator
Vancouver Island Technology Park
VentureLabs
Victoria Square Labs
Zen Launchpad

R&D funding to support your venture

It’s important for tech start-ups to realize that in addition to investor funding, there are also a number of research and development funding programs to support a startup’s growth.

Enhanced Capital Recovery (ECR) is dedicated to helping companies discover the full potential of innovation funding and R&D incentives available. To best support start-ups financially, ECR only charges fees based on results, never before.

If you are new to the innovation game and foresee spending resources in this area, let us help you setup in the right way to take advantage of all of the opportunities.

Contact us today for a free, no-obligation consultation to explore all of the possible funding alternatives that may be available for your company.

How R&D Funding Works in Canada

According to recent research, over 58% of companies in Canada have not followed up on the opportunity to claim a part of the $3 billion in R&D funding offered by the Federal Government of Canada each year.

This missed opportunity can happen for several reasons. Company leaders who assume that R&D funding programs are restricted to technology companies, companies performing laboratory research, or large companies with massive research budgets, are just a few reasons for overlooking these amazing opportunities to fund further innovation or improve the company’s bottom line.

Which industries are benefiting?

The fact is that most companies complete activities during the course of business that may be eligible for R&D funding, such as SR&ED. In general, if some of your staff are engaged in overcoming technological problems for which a solution is not readily available, there is a good chance that the work they are doing is fully or partially eligible for SR&ED.

Over all, the companies who receive funding span a wide range of industries including, but not limited to: manufacturing, agri-business, food manufacturing, oil and gas service companies – and of course start-ups and tech companies.

Who is Eligible for R&D funding?

Almost any Canadian company can be eligible to apply for Scientific Research and Experimental Development (SRED). The CRA outlines three requirements your business must complete to earn SR&ED credits:

You attempted to overcome a technological uncertainty
You used systematic research and development to solve the problem
You aimed to advance a science or technology in the process

Furthermore:

Your Research & Development took place within Canada
You have proof of expenditures related to the claimed projects, for example T4s, and/or invoices
You have ownership of the Intellectual Property resulting from the project
You are in good standing with government financial reporting
Your project expenses were incurred within 18 months of the fiscal year-end as of filing

How much R&D funding is possible?

The amount of funding depends on the amount you spent of eligible projects conducted in Canada. Since salaries are a big part of the claim, entrepreneurs who do not pay themselves a salary can be diminishing the size of their claim.

Enhanced Capital Recovery can help you set up your company for success by showing you how to structure your company and document your projects to maximize success. Outsourcing work overseas can also diminish the size of your funding opportunities, since eligible expenses must occur in Canada.

What expenses can be claimed?

A large portion of salaries of all employees and a portion of the shareholder’s salaries engaged in the projects, contractor fees as well as cost of all materials used or consumed in the course of the research work may be recoverable under one of the funding programs.

Companies may also claim cost of any prototype equipment or facilities developed for undertaking the project. The SR&ED program, for example, allows a claim of up to 65% of the salaries and expenses related to the project.

About Us

Budget 2015 Research and Development Impact

On Tuesday afternoon, Federal Finance Minister Jim Oliver introduced a budget that emphasizes applied research and scientific collaboration with industry and there were no cuts to the SR&ED program as were seen in 2012.

According to the new budget 2015 research and development, including the SR&ED program will continue to receive funding and support technological development in a variety of industries, with notable boosts to a couple areas.

Boost to Manufacturing

Manufacturing in particular received a boost in funding to support innovation:

In addition to SR&ED, automotive parts suppliers will be receiving up to $100 million over 5 years to foster innovation and development.
The “accelerated capital cost allowance” for manufacturers has been extended past its original 2015 lifespan. Companies will now be able to get tax breaks on equipment purchases until the end of 2025. This will help companies write-off machinery and equipment faster and boost the sector’s productivity.

Boost to University and Hospital research centres

University and Hospital research centres were also winners in the 2015 budget:

“The Canada Foundation for Innovation would receive Can$1.33 billion (US$1.09 billion) in new money for university and hospital research facilities, to be doled out over six years beginning in 2017. The budget also includes a modest 2% hike for the country’s research funding councils”

Advanced research initiatives

World-class advanced research was also supported:

The budget pledges to invest more than $200 million per year in new and expanded programs starting in 2016, including projects in physics, space technology and astronomy.

Canada’s R&D Competitiveness Worldwide

Seen in total, Canada has actually lost competitive rank in world-wide R&D competitiveness. According to the Organization for Economic Co-operation and Development (OECD), Canada is no longer a top ten research and development performer.

Of further concern, the OECD report shows a sharp decline in research and development intensity, which is defined as the percentage of gross domestic product spent on research.

How can Enhanced Capital Recovery help your company?

We can help you:

determine if you are eligible for all types of research and development benefits, both federal and provincial;
review your SR&ED claim or defend a claim audit

Contact Enhanced Capital Recovery today for a free consultation and find out if your company may be eligible for SR&ED or other tax credits in Canada.

Your Company Is Missing Out on Tax Credits

The scientific research and experimental develop program (SR&ED) is a generous R&D tax credit incentive offered by the Federal Government of Canada. The program pays more than 20,000 eligible Canadian Controlled Private Corporations in excess of $3 Billion (CDN) each year.

Recover up to 65% of eligible SR&ED expenses

The SR&ED program is a tax credit system designed to encourage Canadian Controlled Private Corporations (CCPCs) to make technological and process improvements and make Canada a world leader in advanced technology. As a result, all CCPCs benefit from a high tax recovery rate of up to 65% for eligible expenses. Start-up CCPCs benefit additionally since the tax credit is also refundable, meaning that a refund is provided whether or not the company has any taxes payable in that fiscal year.

Breakdown the barriers of complex legislation and report writing

Although the SR&ED tax credit is an amazing financial opportunity for many businesses across all industries, complex legislation and time intensive report preparation have created barriers for businesses which are otherwise eligible to take advantage of it.

Contact Enhanced Capital Recovery today for a free consultation and find out if your company may be eligible for SR&ED or other tax credits in Canada!

R&D Tax Credits in Real Estate & Construction

Conducting R&D usually creates an image for most people of scientists conducting experiments in laboratories. For the purposes of the Scientific Research & Experimental Development (SR&ED) tax credit, however, this couldn’t be farther from the truth. It is true that to qualify for R&D tax credits, the R&D work must meet certain standards that show application of the scientific method, yet, the definition is not limited by industry or the type of research or experimentation.

In this article we’ll explore opportunities for Real Estate and Construction companies in Canada to qualify for R&D tax credits which doles out $3 Billion dollars annually.

Real estate companies are often paying for and taking the financial risks associated with engineering work focused on development. As with other industries, it is easy to overlook the validity of this type of R&D and recognize it as eligible for SR&ED or other R&D incentives.

Some specific examples of R&D in the real estate and construction industry include: developing innovative energy solutions, designing and creating structures and building materials to overcome particular challenges.

Looking more closely at these areas of R&D, SR&ED eligible project may include:

development or improvement of construction and building materials
structural designs related to dynamic structures, for example, retractable roofs, solar energy systems
development of construction equipment, tools and temporary construction structures
development or improvement of construction techniques – such as in soil remediation or to achieve environmental certification under programs such as LEED

Unlike what often occurs in other industries, such as manufacturing and IT, real estate and construction companies do not conduct their own in-house R&D. An engineering firm, for example that is hired by a real estate company cannot claim SR&ED since they are not taking on financial risk. The real estate company who hired them, however, can make the claim – if they recognize the opportunity.

Who is Eligible for SRED funding?

Almost any Canadian company can be eligible to apply for Scientific Research and Experimental Development (SRED). Here are the details of the criteria from a company perspective:

Your R & D took place within Canada
You have proof of expenditures related to the claimed projects, for example T4s, and/or invoices
You have ownership of the Intellectual Property resulting from the project
You are in good standing with government financial reporting
Your project expenses were incurred within 18 months of the fiscal year-end as of filing

R&D funding support

There is no doubt that Canadian real estate and construction companies are delivering innovation and contributing to the competitiveness and output of the Canadian economy.

All too many real estate and construction companies across Canada are satisfying the requirements of funding programs without realizing they may be eligible to recover up to 65% of their expenses.

Why Choose Enhanced Capital Recovery?

Our team has brought success to various companies, including those whose claims were initially turned away by the Canadian Revenue Agency. To find out how your innovative real estate or construction activities could result in funding, contact Enhanced Capital Recovery today for a no-risk consultation.