Category Archives: SR&ED Facts

Research and Development Funding for Business Innovation

Provincial and federal governments recognize that innovation requires financing. They are also quite aware of the significant economic value of supporting business innovation and therefore, have research and development funding for business innovation programs in place to put their money where their mouth is. To put this in perspective, the federal and provincial governments combined to provide $7.01 billion in R&D funding in 2012.

Depending on your project, innovation financing can come in various forms, including tax credits, grants and more. The following are some of the major sources of innovation financing that your business should consider.

Federal tax credits

Applying for an R&D tax credit often involves an intensive amount of documentation and follow-through to demonstrate you satisfy the program requirements. All things considered, however, the size of the credit available can make applying worth your time.

For instance, the Canada Revenue Agency’s Scientific Research and Experimental Development program, commonly known as SR&ED, provides tax credits of up to 35% of qualifying expenditures such as salaries, capital costs, consulting fees and materials. For most SMEs, these investment tax credits take the form of a cash refund.

To be eligible, the Canada Revenue Agency (CRA) determines whether or not your project meets the Scientific Research & Experimental Development (SR&ED) specifications using the following three criteria:

Technological Advancement – furthered technical knowledge
Technological Uncertainty – faced technical challenges or uncertainties
Technical Content – went through an iterative process to try and overcome those challenges or uncertainties

These 5 easy questions (see the full article 5 easy question guide for SR&ED eligibility for more detail) should help you decide if you have a potential claim.

1. “Was there a scientific or a technological uncertainty that could not be removed by standard practice/engineering?”

2. “Did the effort involve formulating a hypothesis specifically aimed at reducing or eliminating the uncertainty?”

3. “Was the adopted procedure consistent with the total discipline of the scientific method, including formulating, testing, and modifying the hypothesis?”

4. “Did the process result in a scientific or technological advancement?”

5. “Was a record of the hypothesis tested and results kept as the work progressed?

Provincial and territorial R&D tax credits

With the exception of except Prince Edward Island, the Northwest Territories and Nunavut, every provincial and territorial government has its own R&D tax credit.

Like the federal government program, the administrative details and eligibility of spending can be complex. Enhanced Capital Recovery can help you decide which R&D tax credits you should apply for.

Grants for R&D

Depending on your business sector, you could have access to federal government grants and financial assistance for your R&D.

Grants targeting specific industries across Canada can be found at the Canada Business Network. There are also many provincial and territorial grants and financing programs. These can also be found on the Canada Business Network portal or by contacting your provincial or territorial government.

Need help building a Canadian government funding strategy?

Although R&D programs are not highly visible, assistance is available for those who know where to find it.

When it comes to preparing an application, working with a SR&ED consultant lets you invest your time in other areas of the business and ensures that day-to-day operations will not be disrupted.

Enhanced Capital Recovery is here to help you from beginning to end of the process. We often discover non-intuitive expenses and activities that are routinely overlooked or unclaimed as well as help you implement a tracking tool to simplify the process of your future claims.

With zero upfront fees, there is absolutely no risk to your business to access the proven effectiveness of our team!

Contact us today for a free, no-risk consultation.

5 Easy Question SR&ED Eligibility Guide

The SR&ED program is a tax credit system designed to encourage Canadian businesses to make technological and process improvements and make Canada a world leader in advanced technology.

It’s an amazing financial opportunity for businesses to take advantage of across a wide variety of industries, but eligibility for the program can be confusing.

This article is intended to take some of the mystery out of the process of determining whether your R&D project is SR&ED eligible. So, if you’re wondering, “Is My Project Eligible for SR&ED funding?,” this 5 easy question SR&ED eligibility guide will help you decide whether or not to move forward with a claim.

What is the SR&ED Program?

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

Basic SR&ED Eligibility

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

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

The definition of technological advancements can be interpreted broadly and therefore is not limited to specific industries. A wide range of industries submit SR&ED claims each year, including:

Software
Information Technology, inclusive of hardware, software and electronics
Manufacturing
Agribusiness
Chemicals
Food and Beverage
Health Care and Medical
Machinery & Equipment
Plastics and Materials
Pharmaceuticals
Textiles
Real Estate and Construction

What many businesses don’t realize is that some of the routine business challenges they face each year could be eligible for the SR&ED tax credit. The following 10 SR&ED examples show different cases of its application.

5 Easy Question SR&ED Eligibility Guide

The Canada Revenue Agency (CRA) determines whether or not your project meets the Scientific Research & Experimental Development(SR&ED) specifications using the following three criteria:

Technological Advancement – furthered technical knowledge
Technological Uncertainty – faced technical challenges or uncertainties
Technical Content – went through an iterative process to try and overcome those challenges or uncertainties

This is great, if you understand what they mean by it! The following 5 easy question SR&ED eligibility guide should help you arrive at the right conclusions.

1. “Was there a scientific or a technological uncertainty that could not be removed by standard practice/engineering?”

This is often misunderstood. It is not that a product or process is “new” that makes it SRED. Developing a new product may not necessarily be a SR&ED eligible product unless some technological uncertainty was overcome in the process. If a new widget however, used a new manufacturing process or material that needed experimentation to develop, it’s a sign that technological uncertainty existed. Even if the experimentation ended in failure, this part of the project could still be claimed as a SRED.

2. “Did the effort involve formulating a hypothesis specifically aimed at reducing or eliminating the uncertainty?”

Further to the above point, if there is an unknown factor in developing a product or service, it stands to reason that there will be one or several approaches that will be tested in order to overcome it. Following the scientific method of hypothesis testing indicates a SR&ED project and should be documented to support the claim.

3. “Was the adopted procedure consistent with the total discipline of the scientific method, including formulating, testing, and modifying the hypothesis?”

As in any iterative process, a hypothesis must be tested and modified based on the results. Again, it shows the CRA that a scientific model was followed and that a true technological uncertainty existed.

4. “Did the process result in a scientific or technological advancement?”

Whether successful or not, the testing of a hypothesis will lead to a conclusion – hopefully to a solution. The solution is considered a technological advancement if it means you are now able to complete a process, product or service that you previously were not able to. If the testing does not lead to a successful solution, the R&D work done is still SR&ED eligible.

5. “Was a record of the hypothesis tested and results kept as the work progressed?

Since the process involved in SR&ED work, i.e. the scientific method, is important in determining the eligibility of a claim, it’s important to document it completely. Time tracking of individuals on a project is especially critical to document accurately as wages associated with a SR&ED project are one of the main components of a claim.

Contact us today for a free, no-risk consultation.

Since claiming SR&ED is complex and you do not want to reviews or rejections of your claim it is wise to have the support of a SR&ED professional. Many of our new clients see a significant increase in their SRED refunds when using our end-to-end services.

We’ll help you catch non-intuitive expenses and activities that are routinely overlooked or unclaimed as well as help you implement a tracking tool to simplify the process of your future claims.

With zero upfront fees, there is absolutely no risk to your business to access our time proven support!

Scientific Research and Development tax credits Across Canada

Canada’s research and development tax credit system is a great financial opportunity for many businesses across all industries.

However, market research shows that many eligible organizations experience significant difficulty in determining which projects are eligible and as a result many go unclaimed.

Add to that complex legislation and time intensive report preparation and businesses which are otherwise eligible to take advantage of SR&ED, may not make the effort.

One of the benefits of working with a professional consulting firm is that you are informed of all possible R&D funding opportunities. Most Canadian provinces and territories offer additional R&D tax incentives at a provincial level, therefore it is essential to be informed of all opportunities and how they fit together.

Enhanced Capital Recovery’s services include application for both the Federal and Provincial SR&ED programs. As SR&ED experts, you can expect your claim to be thoroughly processed, and optimized to meet CRA’s strict expectations. In the case of a review, we will be there to assist and guide you throughout the process.

A big part of our SRED service is that contacting us for an assessment is risk free. In fact we’re so confident in our ability to accurately assess and deliver successful SRED claims, that all of our services are based on a percentage of tax credits granted.

The following is an overview of all Provincial and Territorial research and development tax credits across Canada as of December 31^st, 2015.

“Newfoundland and Labrador

Research and development tax credit

The Newfoundland and Labrador research and development tax credit is administered by the Canada Revenue Agency (CRA) and is fully refundable at the rate of 15% of eligible expenditures.

Eligible work and expenditures:
Those that qualify for federal SR&ED tax credits

Filing deadline for claiming the credit:
12 months after the filing due date

Provincial Web site:
Newfoundland and Labrador – Research and Development Tax Credit

Nova Scotia

Research and development tax credit

The Nova Scotia research and development tax credit is administered by the CRA and is fully refundable at the rate of 15% of eligible expenditures.

Eligible work and expenditures:
Those that qualify for federal SR&ED tax credits

Filing deadline for claiming the credit:
18 months after the corporation’s tax year-end

Provincial Web site:
Nova Scotia – Research and Development Tax Credit

New Brunswick

Research and development tax credit

The New Brunswick research and development tax credit is administered by the CRA and is 15% Refundable on eligible expenditures incurred after December 31, 2002, and 10% Non-refundable on eligible expenditures incurred before January 1, 2003.

Eligible work and expenditures:
Those that qualify for federal SR&ED tax credits

Filing deadline for claiming the credit:
Not applicable

Carryback / carryforward:
Non-refundable tax credits can be carried back 3 years and forward 7 years.

Provincial Web site:
New Brunswick – Research and Development Tax Credit

Quebec

For information with respect to Quebec’s R&D tax credits, please visit the provincial Web site at:
Scientific Research and Experimental Development – Quebec

Ontario

Ontario innovation tax credit (OITC)

The Ontario innovation tax credit is administered by the CRA after December 31, 2008, and is fully refundable at the rate of 10% of qualified expenditures.

The annual expenditure limit of $3,000,000 of qualified expenditures is phased out when the corporation’s taxable paid-up capital for its preceding tax year exceeds $25,000,000 and, it is eliminated when it reaches $50 million. The expenditure limit is also phased out when the corporation’s taxable income for its preceding tax year is over $500,000 but does not exceed $800,000.

Eligible work and expenditures:
Only expenditures for SR&ED carried on in Ontario, for which the taxpayer is eligible for the federal SR&ED investment tax credit (ITC), qualify for the OITC.

Ontario rules draw on the federal SR&ED rules relating to the definition of SR&ED, qualified expenditures, the expenditure limit, and its reduction based on prior-year taxable income.

Filing deadline for claiming the credit:
Not applicable

Ontario business-research institute tax credit (OBRITC)

The Ontario business-research institute tax credit is administered by the CRA after December 31, 2008, and is fully refundable at the rate of 20% of qualified expenditures.

There is a $20 million annual cap. The cap must be allocated within an associated group of corporations.

Eligible work and expenditures:
Ontario rules mirror federal SR&ED rules regarding the definition of SR&ED and qualified expenditures other than an expenditure that may reasonably be considered to fund the payment of salary or wages to an employee of the eligible research institute who is connected to the corporation making the expenditure or a prescribed type expenditure.

Filing deadline for claiming the credit:
Not applicable

Ontario research and development tax credit (ORDTC)

The Ontario research and development tax credit (ORDTC) is administered by the CRA after December 31, 2008 and is non-refundable at the rate of 4.5% of eligible expenditures.

Eligible work and expenditures:
Those that qualify for federal SR&ED tax credits Prescribed federal form T2SCH31 must be filed to claim the ORDTC.

Filing deadline for claiming the credit:
Not applicable

Carryback / carryforward:
Carry back 3 years to reduce Ontario corporate income tax payable, but not to a tax year that ends before January 1, 2009.
Carry forward 20 years

Ontario transitional tax debits and credits

The Ontario transitional tax debits and credits are administered by the CRA after December 31, 2008.

Corporations may be subject to an Ontario transitional tax debit or be eligible to claim an Ontario transitional tax credit due to the harmonization of the two legislative acts governing federal and Ontario income taxes.

Manitoba

Research and development tax credit

The Manitoba research and development tax credit is administered by the CRA and is non-refundable at the rate of 20% on eligible expenditures incurred after March 8, 2005, and 15% on eligible expenditures incurred before March 9, 2005.

Eligible work and expenditures:
Those that qualify for the federal SR&ED tax credit

Filing deadline for claiming the credit:
1 year after the filing due date

Carryback / carryforward:
Non-refundable tax credits can be carried back 3 years and forward 10 years for tax years ended after 2003 and carried back 3 years and forward 7 for tax years ended before 2004 and applied against the Manitoba income taxes payable.

The non-refundable tax credit carry forward period has been extended to 20 years for tax years ended after 2005.

Provincial Web site:
Manitoba – Research and Development Tax Credit

Saskatchewan

Research and development tax credit

The Saskatchewan research and development tax credit is administered by the CRA and is non-refundable at the rate of 10% for all eligible expenditures after March 31, 2015, 15% for all eligible expenditures occurring before March 19, 2009, and refundable at the rate of 15% for all eligible expenditures occurring after March 18, 2009 and before April 1, 2015.

Effective for qualifying R&D expenditures incurred on or after April 1, 2012, the refundable R&D Tax Credit for Canadian-controlled private corporations (CCPC) will be subject to a maximum annual limit of $3.0 million in qualifying expenditures. Qualifying expenditures in excess of this annual limit, as well as all qualifying expenditures by other corporations, will now be eligible for a 15% non-refundable R&D Tax Credit. The non-refundable credit can be carried back 3 years and forward 10 years to be applied against Saskatchewan Corporation Income Tax otherwise payable.

Provincial Web site:
Saskatchewan – Research and Development Tax Credit

Alberta

Scientific research and experimental development tax credit

The Alberta scientific research and experimental development tax credit is administered by the Alberta Ministry of Finance and Enterprise and is refundable at the rate of 10% on up to $4 million in eligible expenditures of a qualified corporation, for a maximum credit of $400,000.

Eligible work and expenditures:
Those that qualify for the federal SR&ED tax credit and were incurred in Alberta after December 31, 2008

Filing deadline for claiming the credit:
15 months after the corporation’s filing due date

Provincial Web site:
Alberta Corporate Tax Overview – Includes SR&ED tax credit links

British Columbia

Scientific research and experimental development tax credit

The British Columbia scientific research and experimental development tax credit is administered by the CRA and is refundable for CCPCs up to 10% of the expenditure limit (i.e., $3m x 10% = $300,000) and non-refundable otherwise at a rate of 10% of SR&ED qualified British Columbia expenditures.

Eligible work and expenditures:
British Columbia rules parallel the federal SR&ED rules relating to the definition of SR&ED, qualifying expenditures, and the expenditure limit.

The tax credit is refundable for CCPCs at the rate of 10% of the corporation’s SR&ED British Columbia qualified expenditures for the tax year.

The British Columbia SR&ED tax credit has been extended to allow corporations that are members of partnerships to claim their proportionate share of the partnership’s SR&ED carried on in British Columbia, for qualified expenditures after February 20, 2007.

Filing deadline for claiming the credit:
18 months after the corporation’s tax year-end

Provincial Web site:
British Columbia – Research and Development Tax Credit

Yukon

Research and development tax credit

The Yukon research and development tax credit is administered by the CRA and is refundable at the rate of 15% of eligible expenditures. An additional 5% is available on amounts paid or payable to the Yukon College.

Eligible work and expenditures:
Those that qualify for federal SR&ED tax credits

Filing deadline for claiming the credit:
12 months after the filing due date

Territorial Web site:
Yukon – Research and Development Tax Credit”

“Scientific Research And Experimental Development Tax Incentive Program”. Cra-arc.gc.ca. N.p., 2015. Web. 16 Apr. 2016.

What Type of Work Qualifies for Research and Development Tax Credits?

Is your company completing work that achieves technological advancement? Read on to find out how broadly this is defined when it comes to qualifying for R&D tax credits such as SR&ED.

To qualify as SR&ED, your work must meet the definition of one of the following:

basic research,
applied research
experimental development

Three Categories of R&D

Basic research is work carried out purely for the purpose of advancing scientific knowledge. It’s usually done in universities or research institutes.

Applied research is work carried out to advance scientific knowledge but, unlike basic research, it’s done with a specific practical application in view.

Experimental development is work carried out to achieve technological advancement. It’s by far the most common type of SR&ED work. This type of work occurs in a wide variety of industries and often during the course of regular business. It’s a huge opportunity for businesses to be aware of. Since it is already happening, not tracking and claiming it is a loss to the organization’s bottom line.

Definition of technological advancement

Technological advancement means that you are generating information or knowledge to advance your technology base. This, in turn, will help you to develop new products or processes or improve existing ones.

It is necessary to highlight, however, that new or improved products do not always mean that a technological advancement was achieved.

A simple litmus test for the achievement of technological advancement is to answer the following question: what technological uncertainties did you encounter when you tried to develop the product or process?

So here is the definition which leads to nearly $3 billion dollars in SR&ED funding each year in its simplest form: technological uncertainties are barriers that prevent you from achieving your goals. The knowledge that you gain in overcoming those barriers is the technological advancement.

How SR&ED work is done

No matter what type of SR&ED work you do, you have to follow certain basic procedures. Your work must be a systematic investigation or search by means of experiment or analysis.

This means that each approach you take to resolve your uncertainty should be a planned experiment based on an idea or a concept. You start with a problem that you can’t solve with the existing technology base or knowledge. Then you suggest new ideas for how to solve the problem and you test them. This will eventually lead you to increase your technology base or knowledge.

Basically, it must be a systematic investigation or search, by experiment or analysis, to advance science or technology. If so, you’ve answered the “how” component of SR&ED work.

Getting Started

The process of knowing what qualifies as SR&ED, tracking and documenting it and submitting a claim can be overwhelming. Enhanced Capital Recovery is focused on completing this task for your organization, so you can focus on your core business. We take the risk out of using our services by making our fees 100% contingency based. Contact us today for a free consultation!

Simple Guide to SR&ED Tax Credits in 2016

Claiming your R&D tax credits for your corporation or business can seem complex and overwhelming. In fact, it does take specialized knowledge and insight to maximize your return and to complete it in a way that meets the CRA’s requirements.

Enhanced Capital Recovery is here to take care of your R&D claim, ensuring that nothing is missed and that all the “I”s are dotted and “T”s are crossed on your claim. Even if you prefer to claim on your own, consider ECR to help review your current claim or even past claims. We offer free, no risk consultation – just fill out the contact form at the end of this post if you’d like to take advantage of the opportunity.

The following is the process for completing the claim, with a few tips to overcome some of the challenges in the process.

Forms Required

Whether you’re a corporation, or an individual who carries on a business, you have to complete and file Form T661 if you want to claim SR&ED expenditures. This form is used to provide technical information about your SR&ED projects, calculate your SR&ED expenditures, and calculate the SR&ED expenditures that qualify for an investment tax credit.

To claim your investment tax credit, you also have to file either Form T2038, Investment Tax Credit for Individuals, or Schedule T2SCH31, Investment Tax Credit for Corporations, along with form T661.

Tips:

Document R&D work while it’s in process; for example, keep track of any product trials, experiments to remedy unanticipated results, and documents explaining industry research; meet with key employees often to capture these improvements and make a habit of discussing and documenting your expanding industry knowledge; ECR can help you implement a streamlined tracking system to make end of year filing easier.
It’s good practice to file your SR&ED forms at the same time that you file your income tax return.

Completing Your T661 Form

Form T661 has 10 parts that can be grouped into five components:

general information,
project information
financial information
statistical information
certifications

Part 1: Simply fill out your general information, such as identification and contact information.

Part 2: Project information. In this section, you need to provide detailed information about the scientific or technological content of your work. A separate Part 2 must be completed for each project you’re claiming.

Part 3: Calculate your deductible expenditures for the purpose of calculating your net income.

Part 4 & 5: Calculate the expenditures that qualify for your investment tax credit. If you chose the proxy method to calculate your overhead and other expenditures, you’ll calculate your prescribed proxy amount in Part 5 of the form.

Part 6: Break down the costs for each project you’re claiming in the year.

Part 7: This section helps the Government develop valuable statistics about the type of R&D work done in Canada.

Part 8, 9 & 10: The checklist to make sure that your claim is complete before filing it, then provide information about your claim preparer in Part 9, and sign parts 9 and 10 to certify that all your information is true, correct, and complete.

Maximize your R&D incentives

ECR is a top tier R&D consulting firm. Contact us today for your free consultation!

Does Your Business Qualify for R&D Tax Credits?

As tax season approaches, are you wondering if there are any R&D tax credits your company might qualify for? Canada’s Scientific Research and Experimental Development (SR&ED) Program is designed to help Canadian Controlled Private Corporations (CCPC) fund and make further investments in technological advancement.

According to published survey results by Canada Revenue Agency, approximately three-quarters of companies that apply to the program report annual revenue of $50 million or less – and there is no specific industry that this funding is limited to.

Who is Eligible for R&D 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 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

The definition of technological advancements can be interpreted broadly and therefore is not limited to specific industries. Generally we work with a wide range of industries including:

Software
Information Technology, inclusive of hardware, software and electronics
Manufacturing
Agribusiness
Chemicals
Food and Beverage
Health Care and Medical
Machinery & Equipment
Plastics and Materials
Pharmaceuticals
Textiles

What many businesses don’t realize is that some of the routine business challenges they face each year could be eligible for the SR&ED tax credit. For example:

A food-services company improves its recipe for a frozen meat pie;
A leather-garment manufacturer tries out a new dye and must test garments under various conditions to ensure that the dye stays in;
A pharmaceutical company develops a new lightweight casing for medicinal capsules but discovers over time that it is not leak-proof and so can’t be used (note: unsuccessful R&D projects are still eligible for the SR&ED tax credit)
An engineering and manufacturing company develops and modifies plastic molding technology so that it can protect testing components from the hostile oil and gas field environments.

All these activities, and many more business processes like them, result in knowledge improvement for the company and its staff and hence are recognized as SR&ED by the government and are eligible for an SR&ED tax credit. Many Canadian corporations in your industry, including your competitors, have received SR&ED funds to develop additional R&D projects and build their knowledge base. For companies with annual revenue of $10 million or less, the vast majority credited the SR&ED program with improving their cash flow and profits.

Why Choose Enhanced Capital Recovery?

As a top tier SR&ED Consulting firm, Enhanced Capital Recovery’s business is maximizing government incentives in the areas of Scientific Research and Experimental Development (SR&ED) tax credits for our clients. Since we are a highly specialized SR&ED firm, we offer clients depth of experience, important strategic relationships and insights, a systematized approach and an effective tracking and follow up system.

Wondering if your projects are eligible for an SR&ED tax credit? Please contact us today for a free consultation to see if you are eligible.

My 2016 R&D Resolution: Plan My SR&ED Claim Early!

There are significant advantages to planning your Scientific Research and Experimental Development (SR&ED) claim in advance. Did you know that by submitting your claim within the first six months of your fiscal year end, your claim will processed and returned by the CRA within one hundred and twenty days?

Less waiting means improved cash flow for your business, so make it your New Year’s resolution to plan your SR&ED claim early!

Getting started

Start the planning process with your SR&ED consultant and let him know that you want to plan out your claim from start to finish. Be sure to review your current time tracking and documentation methods. Specific tools can be used to streamline this process and make gathering the necessary information at the end much easier.

Also, you want to ensure that your tracking methods meet the CRA’s strict documentation standards. The goal is to allow your team to focus on their business and giving you the peace of mind of knowing that your documentation will support your claim.

Why choose Enhanced Capital Recovery for your SR&ED planning?

Highly qualified and experienced SR&ED consultants can help you plan and then stay on track to ensure that your next claim is maximized and seamless. Since 1994 Enhanced Capital Recovery’s team has been providing leading-edge technical and financial services to companies seeking to maximize their R&D incentives and tax recovery. With offices in BC, Alberta and Ontario, we offer a professional, end-to-end, risk free approach which explores all possibilities to maximize your R&D tax credits, especially SR&ED.

Industry expertise

Our team of professional consultants have specific industry expertise in engineering, healthcare, manufacturing, software, construction and oil & gas industries and have advanced levels of education in business and engineering. Given our extensive experience and training in SR&ED claims, our team routinely recognizes non-intuitive and often unclaimed qualifying work which can substantially increase the amount of tax credits you receive.

Strategic partnerships

We recognize the value of strategic relationships in order to better serve our SR&ED clients. Therefore we’ve developed strong relationships with the CRA audit teams, alliances with key technology, agricultural and environmental stakeholders and we consult regularly with an advisory board of senior executives in industry leading companies.

Proven track record

Enhanced Capital Recovery’s reputation, knowledge and successful track record are widely recognized by our clients and the Canada Revenue Agency. As such, Enhanced Capital Recovery is quickly becoming one of Canada’s most trusted independent SR&ED consulting firms.

Risk free SR&ED services.

If you are creating new products, improving existing technology, advancing an industry process, or developing a technically challenging innovation, your company may be eligible to receive an SR&ED tax credit refund. Yet becoming familiar with the entire SR&ED claims process and filing the necessary paperwork can be a huge drain on resources. That is time and money wasted if the claim is rejected.

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.

Put the proven expertise of Enhanced Capital Recovery’s team to work to save you time and money to get the maximum refund you are entitled to. Contact us today for a no risk, free consultation!

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!

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

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