Companies often misunderstand the research and development criteria necessary to qualify for SR&ED funding—their experiments failed, the technology advancements were minimal, their research has been conducted elsewhere, are common misconceptions.
While the Canadian Revenue Agency (CRA) does require certain criteria for funding, your company may have already fulfilled the research and development aspects. Here are four common reasons why companies decide not to pursue a SR&ED claim.
“Our work doesn’t qualify for SR&ED funding”
The CRA gives funding to companies from a wide range of industries. This may include:
- Food & Beverage
- Engineering and Information Technology
- Oil & Gas, Chemicals, and Green Energy
- Medicine and Biotechnology
Funding is also available to companies who may not focus on these areas, but carry out day-to-day projects that qualify. For example, a barber shop that developed new computer software for scheduling appointments may qualify under information technology.
The CRA accepts claims from companies of all sizes, and small businesses conducting everyday experimental developments actually form a large portion of the claims.
“We did not meet our experiment’s goals”
SR&ED funding is awarded on the attempt of your project, not success. Three criteria are necessary to qualify: you must identify a technological problem, attempt to fix the problem with research and experimentation, and be able to demonstrate you did so in a systematic—not random—approach.
As long as your company attempted to overcome a technological setback using technology, there is a good chance it can qualify. Several expenses for the development may be claimed, including employee salaries and material costs
“Our research and experiments weren’t ‘groundbreaking’”
The scientific research necessary for funding is not required to take place in a laboratory or be related to medicine, biology, or other sciences. A baker experimenting with new ingredients to extend a product’s shelf life or a fish processing plant researching new canning methods could also qualify.
The research doesn’t need to be innovative to qualify, either. Your business can use existing information and resources in finding a solution, so long as the research gathered is innovative to the company.
“Our technological advancements were too minimal”
Another common misconception surrounding SR&ED is that significant technological advancements are required to receive funding. Your development doesn’t need to benefit the entire industry, as long as it solves your company’s technology problem.
Your business can also improve upon an existing technology to qualify, such as adapting a green energy solution for increased efficiency. Small advancements taking place over an extended period of time may also be accepted, especially if the time is used to gauge your project’s development.
If you are unsure of whether your business qualifies for SR&ED funding, contact Enhanced Capital Recovery today for a free consultation.