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How to Get the Most Out of Your SR&ED Claim

Businesses in Canada have long been taking advantage of the benefits of the Scientific Research and Experimental Development (SR&ED) program. With up to 60% of funding provided for innovative research and development in commercial applications, SR&ED claims have assisted many Canadian companies in funding their R&D projects and remaining competitive in the global market.

While the SR&ED program is extremely beneficial, if not done properly, it could lead to review and rejection by the Canadian Revenue Agency (CRA). In fact, SR&ED claims require in-depth knowledge of current incentives and a familiarity of how to best prepare your claim for maximized funding.

SR&ED claims require specialized knowledge

In order to first maximize your funding, the person preparing the claim must understand the intricacies of SR&ED and other R&D incentive programs. Understanding which incentives the business qualifies for requires both time commitment and knowledge of the Canadian Revenue Agency’s criteria.

For organizations with a small, specialized staff, the majority of their energy is directed towards working on their projects. In these circumstances, it makes sense to consider hiring an expert SR&ED consultant to manage the claim. SR&ED consultants, like Enhanced Capital Recovery, can manage the claim end-to-end and in most cases greatly improve the amount of your claim.

The SR&ED program is changing rapidly

SR&ED program policy is rapidly evolving due to the goals of the program and politics. Keeping informed of policy changes is essential to maximizing your claim and reducing the risk of claim rejection.

However, this can be a challenge for a busy organization that does not have a specific individual to handle SR&ED claims. CRA policy changes can be complex and require interpretation to understand fully.

SR&ED is a technical matter as much as it is an accounting exercise

An important step towards securing a SR&ED tax credit is to understand that the program is not a simple accounting exercise. SR&ED is based on technical merit and therefore requires proper technical documentation, in addition to financial documentation. Successfully achieving SR&ED funding goes well beyond the first step of discovering your company’s eligibility of the program.

Essentially, to qualify for an incentive, your business must demonstrate that it contributed to advancing an industry technology. This involves a scientifically documented process of overcoming technical uncertainty and contributing to the advancement of a new industry technology.

This could be making changes to a process to improve productivity or reacting to an unexpected obstacle with innovative expertise. Regardless of the experiment’s success, these attempts and processes need to be demonstrated in order to qualify for funding.

Proper documentation of SR&ED projects is critical

Satisfying SR&ED criteria is your company’s first requirement in applying for an incentive, but the ability to prove your contributions in the industry are equally as important. The CRA will likely consult with industry experts when reviewing your claim, making demonstration of your technological advancements and gained knowledge vital.

Keep track of any product trials and experiments to remedy unanticipated results, and documents explaining industry research, as these may be required when submitting your claim.

Meeting with key employees often to capture these improvements is a good idea, and making a routine of discussing and documenting your expanding industry knowledge will ease the application process.

Contact Enhanced Capital Recovery for a free consultation to find out how we can help you get the most out of your SR&ED claim.

10 Examples of SR&ED | SR&ED News!

In an important piece of SR&ED News, the CRA has posted 10 draft examples that illustrate key concepts in the Eligibility of Work for SR&ED Investment Tax Credits Policy. The purpose of the examples is to illustrate and clarify key concepts described in the Eligibility of Work for SR&ED Investment Tax Credits Policy.

Here’s a summary of the SRED examples to help you pick out the most useful and applicable ones to your SRED claim.

The difference between technical problem and technological uncertainty – Example 1:

This example of a pump supplier shows how solving a technical problem is not eligible for SRED, but that solving technological uncertainty is.

It is shown that by fixing a technical problem, the pump supplier demonstrated standard practice. By experimenting with several failed attempts to change the conditions that created the problem, the pump supplier demonstrated overcoming a technological uncertainty.

The use of established technology in an uncertain situation – Example 2:

This agri-business example shows that technological uncertainties may arise from limitations in the use of current technology. Although the technology used already existed, since there was no publicly available information on the use of it in this particular application, it qualified as SR&ED to apply the technology to a new situation.

How solving a problem to meet cost targets may qualify for SRED – Example 3:

Although meeting cost targets alone does not qualify for SRED, this example shows that technological uncertainty that arises from the need to avoid using a costly process, could qualify for SRED.

Using standard techniques in a new scenario where the outcome is fairly certain – Example 4:

This greenhouse grower example of SRED not applying shows that applying standard techniques to a new scenario where the results are reasonably expected, does not demonstrate scientific research and experimental development.

Testing a hypothesis – Example 5:

Using a glue producer, this example shows that testing a hypothesis from another scientific discovery and applying it to a manufacturing process is a form of SRED.

The difference between experimental development and trial and error testing – Example 6:

Using a pizza maker as an example, this example shows that by not demonstrating analysis of experimental results, the pizza maker only showed trial and error and not experimental development. This did not qualify as SRED.

New products are not necessarily SRED eligible – Example 7

Showing the example where a company makes a carrot peeler with a glow-in-the-dark handle, which is a new product, but doesn’t challenge any technological uncertainty. Whereas when the company redesigns the handle to improve ease of use and has to experiment with manufacturing processes using new plastics, it meets the criteria.

The part of the project involving applied research is the only SRED applicable part – Example 8

This example shows that a hockey stick maker experimented with a new manufacturing process and conducted testing on the first 500 units. This work counted as SRED, but the subsequent 1500 sticks produced in the project did not.

The same type of work could be considered SRED or not SRED based on whether it is routine work or not. – Example 9

This example shows the work of a lab technologist performing routine data collection which does not apply as SRED and also additional data collection for a SRED project which does apply.

A SRED project may be just a part of a larger company wide project – Example 10

In this electronic component producer example, the producer runs into a problem with the size of one of the components. The producer contracts the miniaturization of the component to another company. This part of the project is considered SRED eligible though the entire project is not.

About Us

Enhanced Capital Recovery’s goal is to assist companies such as yours to truly understand what SR&ED is, what areas in your organization may be eligible under the program, and then assist you through the entire process. Please call us at 1-800-470-0235, visit us online at www.enhancedcapitalrecovery.com or email us at info@enhancedcapitalrecovery.com for a no obligation consultation today!

Given Up on Federal R and D Tax Credits?

Has your company investigated federal R&D tax credits, such as Scientific Research and Experimental Development (SRED) and been disappointed or dissuaded by the results? Or perhaps you’ve hired an accounting or consulting firm to handle your SRED claim and still not had much success?

Enhanced Capital Recovery has worked with several companies who have been in the exact same position – including one where an accounting firm or SR&ED consulting firm had dismissed the viability of a SRED claim and yet a valid claim existed!

In the case of a technology start-up we have worked with over the past 5 years, an accounting firm as well as the CRA had discouraged the company stating that their projects did not qualify for SR&ED. Fortunately, an insider recommended a review by Enhanced Capital Recovery. We looked at their challenges and how they were trying to overcome them and over a 15 min call assessed that they were eligible for SR&ED. Over the last 4 years we have helped the company recover in excess of 750,000 dollars which they have since reinvested to grow their business!

What did Enhanced Capital Recovery do differently? By engaging a technical expert who understood the company’s technology challenges on a technical level and being able to articulate them in a manner the CRA recognized as a valid SR&ED application, we created a successful SRED claim out of a potentially failed one.

If you’ve had a failed SRED claim or have given up the idea claiming for SRED because of the effort it takes to put a claim together, consider a 15 minute discovery call with an ECR consultant. We’ll ask you some relevant questions and very quickly assess the validity of your claim.

We will then engage a technical specialist knowledgeable in your industry who can further assist in identifying and documenting all the challenges you have tried to overcome so you have a complete and successful claim where all your eligible expenses are recovered.

Our goal is to assist companies such as yours to truly understand what SR&ED is, what areas in your organization may be eligible under the program, and then assist you through the entire process.

Let us do all of the work so it is a positive experience for your team that enables you to work on more eligible projects and increase your competitive advantage- all with no upfront costs for your organization.

We’ve helped many companies identify, document and successful claim SRED – let us review your claim to maximize your SR&ED return today. Read more about why we are industry leading SRED consultants.

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

Tax Credits for Farmers & Food Industry

The food, beverage, and agriculture industries offer many opportunities to capitalize on SR&ED funding. In making your business competitive in Canada, you’ve probably experimented with your normal routines or tried developing new products.

Once satisfying the basic requirements, the scientific development does not need to be groundbreaking to benefit from funding—it can be as simple as adding a gluten-free version of a popular treat to you bakery’s menu or finding a use for everyday waste materials.

Here are some examples of everyday farming and food processing projects that could be eligible for SR&ED funding:

Farming and Agriculture

As populations rise and conventional farming methods become dated, the federal government is rewarding farmers who advance agriculture techniques. Modifications that increase crop yield or altering equipment to increase production and safety are common projects.

Attempts to make your farm more environmentally-friendly also benefit from funding, such as developing alternatives to harmful chemicals, using equipment that requires less energy, or improving irrigation techniques and routines for reduced water use.

Finding a practical use for traditional waste (manure, groundwater, or leftover livestock feed) can receive funding, such as altering equipment to be powered by unused grains or corn.

Processing and Manufacturing

Food processing companies also reap the benefits of SR&ED funding. For example, developing an existing product to meet consumer needs of gluten-free, sugarless, and nut-free foods is a simple and common procedure that many food processors and restaurants already do.

Experimenting with ingredients to extend a product’s shelf-life or to improve flavour and nutrition also qualify. Conducting research on the impact of a process, such as your storage or shipping techniques are included in the program as well.

Vineyards and Breweries

In trying to create the next must-have wine, there’s a good chance you altered your usual process. Experimenting with soil types, grape selection, and water control are everyday activities that qualify for tax credits.

Funding is also available for breweries. Examples of eligible projects include changing the bottling process for better efficiency, experimenting with hops to improve flavour, or developing new packaging to reduce materials.

Plants and Greenhouses

Everyday greenhouse operations could also lead to your business receiving SR&ED funding. Modifying seed combinations, experimenting with temperatures, and determining how to better grow plants that are non-native to your area are examples that may qualify.

Various types of research may also be eligible, such as examining how different temperatures, lighting, and irrigation routines impact growth. Be sure to record all experiments and research details, no matter of the success.

Many businesses across Canada are satisfying the requirements without realizing they may be eligible to recover up to 65% of their eligible expenses.

To find out how your routine food and agriculture activities could result funding, contact Enhanced Capital Recovery today for a no-risk consultation. We’re your SR&ED consulting experts in Vancouver, Edmonton and Toronto.

What Your Accountant Doesn’t Know About SR&ED

If your accountant is handling your SR&ED claim, you may be leaving opportunities on the table to significantly improve your claim. The fact is, filing an SR&ED claim is more of a technical exercise than an accounting exercise. In-house accountants may be qualified to handle the accounting aspects of the claim, but the key to maximizing your claim and having it approved, lies in proper tracking and definition of projects, a thorough understanding of what qualifies for SR&ED and technical documentation.

Accountants are simply not Engineers and may have little understanding of the technical aspect of SR&ED. In short, accountants lack the required scientific and industry-specific knowledge to identify and document a SR&ED claim. Specialized consultants like Enhanced Capital Recovery are both Engineers and Finance professionals, trained specifically to handle SR&ED claims. Here is how professional SR&ED consultants can take your SR&ED claim to the next level.

Maximizing your claim

Through the SR&ED program, Canadian businesses can recover up to 65% of eligible expenses with various tax incentives—SR&ED consultants understand how all of the applicable tax incentives work and can make sure they are applied. Whether you own a dairy farm in rural Alberta or software development company in Montreal, your Enhanced Capital Recovery SR&ED consultant will have industry specific technical expertise to help maximize your claim.

The SR&ED landscape is constantly shifting with new rules and new opportunities being introduced to enhance your claim. By staying up to date with SR&ED trends and news, SR&ED consultants are able to capitalize on these new opportunities.

SR&ED Consultants are industry experts

When you work with a SR&ED consultant, you are not only working with tax incentive consultants. SR&ED consultants have Engineering and Business backgrounds with matching expertise in everything from pharmaceuticals and chemicals to manufacturing and information technology.

Documentation is necessary when submitting a claim and the CRA expects industry-specific terminology and knowledge during the process. SR&ED consultants are able to document your claim to meet the CRA’s strict guidelines and standards.

Valuable industry partners

Experienced SR&ED consulting firms have developed networks and partnerships in industry. For example, ECR has become one of Canada’s most trusted SR&ED consulting firms by forming valuable partnerships in industry. SR&ED consultants also stay on top of news and policy changes, allowing for up-to-date information and a smoother, quicker claims process.

If your claim was previously rejected, a SR&ED consulting professional will help you determine the reasons it failed. Enhanced Capital Recovery has worked with several clients in this situation and were able to adjust their claim and get it approved.

Post-claim support

SR&ED consultants provide ongoing support. At Enhanced Capital Recovery, our client relationship doesn’t end when your tax credit is granted. Should the CRA review your claim, we will continue to support you through the entire process. We are also happy to work with you on future projects to determine SR&ED eligibility.

Risk-free consultations

Hiring a SR&ED consultant should not be a risk for your company. In fact an SR&ED consultant can take the risk of loss of time and loss of resources out of your SR&ED claim process. Working with ECR is risk-free—we don’t get paid until you receive a tax credit from your successful claim. There are no upfront or hidden fees and our services are based on a percentage of your credit.

Getting started with the right SR&ED consultants

All consultants at ECR are trained in SR&ED procedures and are skilled industry experts, but beware of other firms that contract work to technical writers or that may assign your claim to a junior consultant. We value all of our clients equally, no matter the services you require or the size of your business.

Please contact us about how ECR can assist your business today—let our SR&ED consulting professionals help you maximize your SR&ED claim while your accountant does the job that they do best.

SR&ED Claim Review? What to Expect from the CRA

What is the SR&ED Claim Review Process?

The Scientific Research and Experimental Development (SR&ED) claim review is a process involving many steps and individuals. But what exactly happens at the Canada Revenue Agency (CRA) once your claim is filed? Here is what you can expect during the review process.

Determining if you qualify

The CRA’s first step is determining whether your company and projects meet the basic criteria. Are you a Canadian Controlled Private Corporations (CCPC)? Is your T661 form completed correctly? Has your company attempted to overcome a technological uncertainty? Have you used research and development (R&D) to advance technology?

This is also the stage where a CRA financial reviewer inspects whether the expenses you outline in your claim are eligible costs for SR&ED program funding.

Technical aspect review

Once the basic requirements have been determined, the CRA science advisor—sometimes with the assistance of an outside industry expert—further inspects the technical aspects of your claim.

This involves the review team analysing whether your project employed R&D to solve a technological or scientific problem. It will also investigate how you measured the success of your project, and to ensure the knowledge gained was innovative to your company.

Request for information

In some cases, the CRA review team will request additional information. This can provide further evidence to support your claim or to answer questions for clarification. Should this be necessary, you will be contacted by a science advisor with a specific request.

An outside consultant may also be contracted during this stage to clarify information for the review team. The CRA is familiar with all consultants and confidentiality is ensured in every claim.

Site visit or interview

The CRA may request an interview or site visit when verbal clarification or additional documentation is insufficient. During an interview, the science advisor, possibly accompanied by a consultant, will identify the areas of your claim that are unclear.

The interview may also be to determine whether the projects were sufficiently documented and that costs were spent as claimed. For this reason it is essential to document and organize evidence of your claim.

Enhanced Capital Recovery can ease the process

Allowing a tax consultant like Enhanced Capital Recovery to take care of your SR&ED claim can ease the review process and even reduce the waiting period.

An accurate claim, complete with industry-specific information, will leave the CRA with less reason to request information or site visits for clarification. Our consultants are knowledgeable with the entire review process and could identify additional qualifying projects.

To find out how we can provide efficient assistance in submitting your claim, contact ECR today for a free consultation by phone at 1-800-470-0235 or email us at info@enhancedcapitalrecovery.com. We look forward to hearing from you.

Does My Company’s Work Qualify for SR&ED Funding?

Each year, the Canadian Revenue Agency (CRA) provides over $4 billion in tax credits through the Scientific Research and Experimental Development (SR&ED) program, often to small or medium sized companies.

However, countless businesses across Canada miss out on these incentives despite satisfying the program’s criteria in their everyday activities. In fact, qualifying for SR&ED funding is easier than many think—here are the program requirements that your company may be satisfying right now.

Basic SR&ED criteria

The CRA outlines three requirements your business must complete to earn SR&ED credits:

You attempted to overcome a technological uncertainty
You used unfamiliar, systematic research and development to solve the problem
You aimed to advance a science or technology in the process

While the experiments must be conducted with a measurable goal, they can involve basic or applied research—advancing scientific knowledge with or without an intended use in mind. For example, if your goal is to improve an artificial flavouring, it does not need to be used for a specific food or beverage.

Your projects do not need to be successful to qualify for funding, as long as you can provide evidence of the attempt.

Scientific research

There is a misconception surrounding the program’s scientific research aspect that it is reserved for medical, biological, or other laboratory research. In reality, the research can be as simple as a video game producer researching methods of advancing game play graphics.

The results are not required to be innovative to the industry, but the acquired knowledge or technological advancements must be new to your business.

Experimental development

Many small businesses qualify for experimental development as part of their daily activities without realizing it. Conducting experiments to create new products, machinery and manufacturing procedures are accepted, but so too are innovative services and support work.

Improvements to existing technology also qualify, such as adapting computer software for enhanced efficiency or improving the machinery to manufacture clothing garments.

What doesn’t qualify?

There are some types of research and experimental development that do not qualify for SR&ED funding. Since the projects must be conducted with a planned approach, any random or routine investigations are not eligible, including quality control procedures.

Work that can be classified as commercial gain does not qualify, such as promotions, market research, or the commercial use of a new technology. Experimentation to a product’s style is also not accepted.

Procedures related to mineral, natural gas, or petroleum production, including exploration and drilling, also do not qualify for SR&ED funding.

Companies that file a claim could receive up to 65% of eligible expenses returned as a tax credit. To determine if your business is fulfilling SR&ED program requirements, contact Enhanced Capital Recovery for a free consultation today.

Already Claiming SR&ED? SR&ED Consultants

If you currently claim the SR&ED tax credit, then you already understand the value and importance of it towards your bottom-line. What you may not know, is, many claimants leave unclaimed funds as they miss identifying projects and related expenses because of an oversight or lack of understanding of the SR&ED process.

Recently, the CFO of a large western Canadian home builder felt they were under-claiming on their current filing and prior to filing it he invited Enhanced Capital to review claim. The resulting SR&ED claim increased 5 fold as an Enhanced Capital Specialist identified several additional projects that had been missed.

Had the CFO not called us prior to filing, his company would have missed recovering an additional quarter of a million dollars that the claim increased by due to the additional projects and expenses submitted.

SR&ED is 15% accounting and 85% technical. Failing to identify all eligible projects or not properly documenting can result in leaving thousands of dollars unclaimed.

This tremendous positive difference in returns should be left to the SR&ED experts, not to chance.

There are many examples of claims we have reviewed that did not clearly capture the challenges the organization faced and the obstacles and uncertainties that the CRA would understand and accept.

Our consultants at Enhanced Capital Recovery consist of Food Scientists, Computer Engineers and Manufacturing specialists who complete 100s of claims each year and have first-hand knowledge of what to claim and what to avoid claiming.

By matching the right technical expert for the job, we are able to help you identify all applicable projects and avoid overlooking any claimable activities – even those we find frequently left unclaimed by accountants and other consultants.

Chances are your competitors are maximizing their SR&ED tax refunds by utilizing experts to increase their competitive advantage; shouldn’t you be doing the same?

If you are already claiming the SR&ED tax credit, we can review your current claim to see if we can add value by identifying additional SR&ED eligible projects and related expenses. We will review your technical documentation and identify improvements that will ensure that your claim has the best chance of success. Best of all, since we only bill you on the value we add, if we aren’t able to add any value and increase your claim, you do not pay us anything while still ensuring your risk of leaving unclaimed funds is minimized.

If your claim is under CRA review, Enhanced Capital Recovery can help support the claim and if your claim has been rejected, we can help to review it and improve future claims so they are not rejected.

Our track record of 90+% success in claim defence and claim review speaks for itself!

Regardless of your field, or size of business, Enhanced Capital Recovery is here to help with your SR&ED claim by reviewing your current or past claim. For a free consultation, call Enhanced Capital Recovery at 1-800-470-0235 or visit us online at www.enhancedcapitalrecovery.com or email us at info@enhancedcapitalrecovery.com. We’ll help you quickly determine if there is an opportunity to increase your SR&ED claim.

Enhanced Capital Recovery. Driving innovation in savings and recoveries!

SR&ED Claims 101 for the Food Manufacturing Industry

Many food manufacturing and processing companies across Canada are fulfilling the criteria for Scientific Research and Experimental Development (SR&ED) tax incentives, yet few claim the available funding. How can this be the case?

In large part it’s due to a variety of misconceptions clouding the SR&ED application process. The main misconceptions are about the size a business needs to be and the type of R&D that’s acceptable. The fact is, businesses are not required to conduct laboratory research, or be a large-scale company.

So long as your business demonstrates a technological advancement or having solved a technical uncertainty, it could qualify—and those advancements don’t need to be as exceptional as you might imagine.

Who can benefit?

A wide range of food and beverage manufacturers may qualify for SR&ED tax credits. These can include:

Confectionary, dairy, starch and oil manufacturers
Seafood, poultry, egg, produce and fruit producers
Meat processing and slaughtering operations
Wineries, and beverage, tobacco, and specialty food companies
Pet and animal food manufacturers

Canada is home to thousands of food processing companies, in these categories and others. The best way to find out if your business qualifies is to arrange a no-obligation consultation with an SR&ED specialist.

What is technical uncertainty?

Establishing your company’s ability to overcome technical uncertainty goes a long way in applying for SR&ED funding—but what is it, exactly? It means that your business encountered an obstacle during a manufacturing or production process, and made steps towards solving it through your own investigation and without knowledge existing in the industry.

Examples could be a product confronted with challenges to its shelf life solved without using industry-established chemicals, or introducing a quicker process for enriching baked goods with vitamins and minerals to meet your distribution needs.

Technical uncertainty can be derived from something as basic as a new recipe resulting in unanticipated effects that your staff resolved using their own knowledge.

How might I have advanced technology?

Much like technical uncertainty, your company’s technological advancements in the industry don’t require laboratory examinations. Perhaps you increased your product’s flavour and texture using natural ingredients, or developed machinery for increased packaging efficiency.

The Canadian Revenue Agency awards merit of technological advancement based on attempt, not success. If your business encountered technical uncertainty, but failed to solve the problem, the research still helps the industry gain knowledge of the issue. The only requirement is that the effort was based on a systematic investigation—not random attempts.

Why is it important to track this information?

There is a good chance your food manufacturing business has made technological advancements, congratulations! But demonstrating these industry contributions is just as essential in applying for a tax incentive.

The criteria can be proved though conducting product trials and documenting the results, or indicating how the knowledge you gained will be applied to future development. It is important to record each development and research process fully in order to best qualify for funding.

ECR works with companies of any size, and many companies eligible for SR&ED are small businesses. With SR&ED consulting offices in Vancouver, Edmonton and Toronto, our team has brought success to many companies, including those whose claims were initially rejected by the Canadian Revenue Agency. Your company will work with a consultant knowledgeable in the industry to recover the most funding, with the least amount of risk possible.

For a no-obligation consultation, submit a contact form and our team will arrange a free assessment of your SR&ED case.