The Scientific Research and Experimental Development (SR&ED) tax credit is a Canadian government incentive program designed to encourage companies to invest in research and development activities. It is a tax credit that can be claimed on a company's federal (and provincial) tax return for eligible R&D expenditures incurred in Canada.
What is SR&ED? Are there other sources of funding for my projects?
The program provides support for a broad range of industries, including manufacturing, software development, engineering, and biotechnology, among others. The credit can be used to offset taxes owed and in many cases can be refunded in cash. To be eligible for the credit, the R&D project must meet the criteria set out by the Canadian Revenue Agency, including demonstrating scientific or technological advancement and the use of a systematic approach. The SR&ED tax credit can provide a significant financial boost to companies conducting R&D in Canada and can be a crucial factor in making R&D investment decisions.
There are many government programs which are administered regionally and targeted at specific industries. It is hard to know which ones may be related to your business and with active funding at any one time. We can help you identify which programs might be relevant and complementary to SR&ED or assist with applications.
How do I know if my company is doing SR&ED eligible activities?
If you have a company which is developing advanced products and services based on proprietary technology that you own, or improving upon existing technologies, you might be doing SR&ED eligible work. You can be doing the work internally via employees or paying Canadian contractors to do the work for you in Canada. You may also be spending money on prototypes for testing.
In recent years the requirements for a systematic investigation have increased, meaning that it is easier to claim SR&ED credits for software, electronics, medical, and robotics companies, and other companies which have in-house engineers and technical staff pursuing documented programs of development. Not all R&D will meet CRA’s requirements, but until you do an in-depth analysis which examines the nature of the work, it is hard to know exactly how much will qualify.
Companies which may struggle to claim SR&ED initially can work to improve their documentation and processes to correctly identify and document the portion of projects which meet CRA guidelines for SR&ED. Our team has extensive experience supporting clients through this process.
Why Choose Manning Elliott Tax – Specialty Services to help with your SR&ED Process?
The SR&ED program is a powerful program to support innovation in Canada. With over 16 years’ experience advising companies claiming the credit, our team has seen thousands of success stories with companies surviving economic downturns and keeping scientists and engineers employed while delivering world leading products and services globally. However, it is a dynamic program and while the rules don’t change every day, it is important to ensure that you are providing CRA the information they need to approve the claims on the first pass. In the event of a review you also will want to have the information ready to expedite the process and minimize delays. A good analogy is that like a personal trainer, we can’t lift all the weights for you but we can help create a customized and individual plan that is proportional to your objectives, then work with your team to implement the plan, and finally, we can help prepare and submit the prescribed tax forms.
Our goal is to establish a long term relationship and ensure we are proactively advising our clients on best practices for project and expense tracking within the context of their business and the abilities of their team. We will work with your team to iteratively improve internal processes to minimize additional time required while ensuring all of the necessary information that CRA needs to approve your claims is available.
Sometimes, all that is needed is targeted advice to enhance performance. Our scope of practice spans from a few hours of tailored advice to full service support including long term planning, periodic update meetings, and full-service technical report editing and advising, culminating in final submission of the forms, once reviewed and approved by the client. Lastly, we can fully support you in the event of a review with CRA, to ensure a streamlined and optimal outcome.
Please connect with us directly to discuss how we can help you with your SR&ED or grant funding activities.
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More detailed information about the SR&ED eligibility criteria can be found at the CRA website: https://www.canada.ca/en/revenue-agency/services/scientific-research-experimental-development-tax-incentive-program/overview.html
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Michael Weatherby - Principal at Manning Elliott in Vancouver