R&D tax credits, such as SR&ED in Canada, are not limited to scientists conducting experiments in laboratories. Although in order to qualify for R&D tax credits the R&D work must meet certain standards that show application of the scientific method, the definition is broad enough to encompass a wide variety of industries and activities, including in the fields of Engineering and Construction.
The reality is that Engineering and Construction firms are often paying for and taking the financial risks associated with engineering work focused on development. In our examples, the companies at first assumed that they would not be eligible for R&D tax credits. This, however, was not the case.
In our examples, the engineering company was providing their services to one of their clients who was hired to complete an underwater tunnel. The engineering firm thought that only their client could claim for SR&ED because of the fixed fee contract agreement between the two companies.
The construction company thought that they could not claim SR&ED because the tunnel was the property of the city that hired them to build the tunnel. After reviewing the agreements between all three of these parties, it was determined the intellectual property rights belonged to the engineering firm and/or the construction company and not to the city that hired them.
Both companies were able to successfully claim SR&ED for their employee’s salaries who were involved in the R&D, engineering for their prototyping costs, cost overruns versus the flat fee contract, and the cost of materials consumed or transformed.
In total these two companies received $230,000 in SR&ED funding. Both these companies also realized that they could claim SR&ED every year, for new and ongoing projects, as long as their contracts were worded with a SR&ED clause.
In general SR&ED eligible projects in Engineering and Construction 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
Who is eligible for SR&ED 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
Why Choose Enhanced Capital Recovery?
All too many companies across Canada are satisfying the requirements of funding programs without realizing they may be eligible to recover up to 65% of their expenses.
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 engineering or construction activities could result in funding, contact Enhanced Capital Recovery today for a no-risk consultation.