Canada’s oil and gas industry is a backbone of the country’s economy and the federal government is rewarding these companies with R&D tax incentive, such as SR&ED tax credits. However, businesses often shy away from applying due to misconceptions about the program.
The Canada Revenue Agency (CRA) excludes any oil and gas prospecting, exploring, drilling, and production operations from funding—but there are plenty of other related activities that could allow your business to recover up to 65% of eligible expenses.
To qualify, your company needs to have surmounted a technical uncertainty using scientific research or experimental development. Here are examples of what activities can and cannot qualify for funding and what you can do to capitalize on SR&ED tax credits.
What types of work are eligible?
While direct oil and gas operations are excluded from the SR&ED program, there are many opportunities to apply for funding. Creating or improving technology to advance a process, such as new software for more efficient automated engineering, is a common project in the industry.
The manufacturing sector also offers opportunities. Experimenting to improve hydraulic systems, A-frames, rubber components, or equipment that reduces environmental harm may be accepted.
Keep in mind other areas that are not directly related to the oil and gas industry, but could be an eligible everyday activity. For example, perhaps you improved your transportation or storage equipment to overcome a technical setback.
What projects do not qualify?
As mentioned, the CRA states that “prospecting, exploring or drilling for, or producing, minerals, petroleum or natural gas” do not qualify for SR&ED funding. Other activities like routine testing or data collection, market research, or advertising are also excluded.
How should I prepare for a claim?
Before beginning any projects that may qualify for SR&ED funding, it is important to document the entire process. The CRA will request all details about the research or development your company conducted, whether the projects were deemed successful or not.
The review team will also require information about which employees worked on the project, what tasks they performed, and what amount of their time spent working was allotted to the project.
How can Enhanced Capital Recovery help?
Hiring a professional SR&ED consulting firm like Enhanced Capital Recovery is especially worthwhile for oil and gas claims. These businesses often partner with outside companies and foreign joint ventures, making the SR&ED application a complicated process.
We are not only specialized in SR&ED procedures, but we are oil and gas experts as well. You will work with a highly skilled consultant who is familiar with the industry language the CRA expects.
To schedule a no-obligation discovery assessment, contact Enhanced Capital Recovery today and learn how much of your expenses could be recovered through the SR&ED program.