Tag Archives: Scientific Research and Experimental Development Vancouver Edmonton Toronto

CRA Reviews on the Increase | SRED Advice from the Experts

The Biggest Rise in CRA Reviews

For the past 5 years the CRA has been increasingly reviewing Scientific Research & Experimental Development (SR&ED) submissions – but 2013 may have shown the biggest rise of all. It’s important for your organization to get SRED advice as the federal tax incentive, known as SRED, doles out an impressive $4 billion annually and is the largest form of Federal support for industrial research and development, especially for innovative SMEs.

Our SRED consultants are hearing from companies who in the past have received their refunds without challenge and are now experiencing delays and even reductions in their claim amounts.

Why are these changes happening and what actions can your organization take to address this threat?

Why are more CRA reviews of SRED claims occurring?

The Government of Canada is attempting to make the SRED program more efficient and targeted. It wants to see SRED dollars hitting the mission of the program – to advance Canada’s advancement of technology.

The CRA’s recent policy changes and increase in SRED staffing have been identified as the main reasons for the sharp increase in disputed SR&ED submissions. What this means practically is that more focus is being given to the claims process and there is an increasing need to understand and follow the purpose and intent of the program.

SRED advice for your organization about increasing SRED reviews

With increased scrutiny on SRED claims, it’s more important than ever to utilize the services of a professional SR&ED consulting services firm. Experts who specialize in SR&ED claims have years of experience in identifying eligible costs, stay on top of changes in SRED policy and have a working knowledge of the CRA’s requirements and review process.

Proper project identification

A great deal of company resources can be wasted by documenting projects that turn out to be in-eligible for SRED. It makes sense to employ an expert to help you scope out new projects and determine what projects or parts of projects would be eligible.

Set up your organization for SRED documentation

Once you’ve identified whole or parts of projects that are SRED eligible, it is important to set up a documentation system at the outset of a project, not afterwards. It’s also important to document the correct information. The CRA is looking for documentation that proves a systematic exploration of a hypothesis and clearly shows the steps taken and the reasoning behind them.

It’s just as easy to over-document as it is to under-document your SRED projects and this can waste employee resources and undermine the sustainability of future SRED projects.

Some extra discipline and diligence are needed for time-tracking of employee contributions to the project as well as expenses related to the project. These expenses are best proven when tracked at the time of the project and with proper set-up can be captured efficiently.

SRED Consulting Services

At Enhanced Capital Recovery we’re helping our clients avoid reviews by preparing SRED claims in precise accord with the CRA’s most up to date policies and procedures. If reviews do occur, we’re there to support clients during a review. We also help clients who prepare their own SRED claims by providing a third party review or helping to defend a claim.

Get Help

If your SRED claim is under review or you want to capitalize on a claim either now or in the future, contact us to find out how we can help. We’re happy to provide more information through a free consultation.

The New Innovation | R&D in Canada

Based on a speech delivered by Bombardier Inc. president Pierre Beaudoin on Wednesday, Nov. 13,2013.

Bombardier President Pierre Beaudoin’s ideas and thoughts on innovation send an important message to Canada’s innovators and policy makers. For innovators the message is clear that strategic innovation takes time, patience and investment – but is essential to Canada remaining competitive in a global market place. For policy makers in Canada the message is to support SMEs with even better R&D incentives like the Scientific Research and Experimental Development tax credit.

Beaudoin points out that there is a significant wave of change under way in terms of how innovation is occurring globally. He points out that as a country it is imperative that we pay attention to the changes that are happening and either adapt or be left behind.

He urges that it so important for Canada to keep pace with global innovation because innovation that reaches commercialization builds sustainable growth. Innovative products, processes and services increase productivity, income per capita and the quality of social programs.

The fundamentals of innovation

Fundamentally, innovation requires a number of factors to fall into place:

an entrepreneurial environment and an appetite for risk,
sufficient investment in R&D especially by the private sector,
high quality scientific research centres,
extensive collaboration between universities and industry,
high levels of competition,
access to capital and financing,
and, last but not least, the need to be persistent and tenacious.

In terms of access to capital and financing, Beaudoin affirms the excellence of R&D tax programs like SR&ED. He urges that innovation needs this type of public-private sector partnerships to continue to foster friendly and supportive environments, especially to make long-term research project feasible.

He also suggests some improvements for the SR&ED program and the need for further programs. He states that these programs, although excellent, “do little to alleviate the problem faced by many cash- strapped SMEs who have few options for securing the early-stage funding needed to advance their innovative ideas. This financing challenge often stops innovation dead in its tracks. To address the issue, the taxable income and capital thresholds to qualify for the small business refundable Scientific Research and Experimental Development (SR&ED) tax credit of 35% should be raised to alleviate some of the pressure faced by pioneering SMEs.”

Inclusive innovation

Beaudoin points to a change in how innovation occurs in and beyond the organization, a change that sees more conversations happening with diverse groups of stakeholders. His experience, points to fostering conversations between employees, customers, suppliers, partners, end-users and even competitors.

As a country Beaudoin urges industry leaders and policy makers to make the strategic choice to create value through innovation. By improving Canada’s infrastructure for innovation and by encouraging, expecting and rewarding people for challenging the status quo and risking failure to find a better product, process or service, this can be a reality.

Innovation Resources

As R&D incentive consultants Enhanced Capital Recovery can help your organization capitalize on R&D incentives in Canada. If your organization is innovating products, services or processes, contact Enhanced Capital Recovery today to see how we help support your mission to join to new wave of global innovation.

Research and Development Tax Credits for App Developers

The outbreak of smart phones in the past decade has resulted in the technological convergence that will likely define an era. To compliment this new technology has been the creation of mobile applications, “apps,” that aid and entertain over a billion users around the world.

Canadian app developers are at the forefront of these modern conveniences-turned-essentials, and are already benefiting from Scientific Research and Experiment Development (SR&ED) tax credits. Here is how your business can reap the SR&ED rewards, as well.

Why is app development important to the federal government?

Once considered just a facet of the software and communication industries, app development has blossomed into a sector of its own. Economists project global app sales to eclipse $25 billion this year, nearly $1 billion from Canada’s 50,000-employee app workforce alone.

The federal government is recognizing the impact that app development has on the economy and the potential to attract highly-skilled app creators to Canada. This opportunity to become a leader in the global app marketplace has the Canadian Revenue Agency (CRA) rewarding those contributing to the industry.

How is creating apps considered “research and development?”

The CRA rewards Canadian companies that undertake experiments for the sake of advancing technology—whether or not there is an intended use after the fact.

Software developers do this on a daily basis when trying to create apps that overcome technical barriers. For example, cached turn-by-turn GPS navigation solved drivers’ difficulty of navigating roads outside of cell phone service range.

In addition to creating public direct-to-sales apps for Android, Apple, BlackBerry, and Windows devices, businesses that produce apps for another company’s specific use are also eligible. Perhaps your firm was approached to create an app that allows your client to share inventories through their smart phones.

These examples and others are instances where research and development is used in creating apps. As per general SR&ED criteria, market research, sales promotions, routine testing, and stylistic changes are not eligible for funding.

What expenses can be recovered?

Since all research and experiments must be conducted systematically and not at random, there must be a specific technical barrier in mind prior to developing the app. Once this requirement is satisfied, a variety of expenses can be recovered through the SR&ED program

The CRA funds “wages, materials, machinery, equipment and some overhead.” This means app developers may claim salaries for employees who directly worked on the project, hardware necessary to create the app, and other related fixed costs.

If you are a Canadian app developer—or a business in an unrelated industry that created or improved software to solve a technical uncertainty—contact Enhanced Capital Recovery with SRED consulting offices in Vancouver, Edmonton and Toronto today. Our no-risk consultation will allow you to discover how much SR&ED funding you are eligible to receive!

For a free consultation, complete our contact form, call us at 1-800-470-0235, or email us at info@enhancedcapitalrecovery.com.