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?
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
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!