What is the SR&ED program?

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The Scientific Research and Experimental Development (SR&ED) tax incentive program is the largest single source of federal government support designed to encourage research and development (R&D) in Canada. Each year, the SR&ED program provides over $4 billion in investment tax credits (ITCs) to over 18,000 claimants.
 

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What is the SR&ED objective?

 

The objective of the SR&ED program is to deliver SR&ED tax incentives in a timely, consistent and predictable manner, while encouraging businesses to prepare their claims in compliance with tax laws, policies and procedures. The program commitments are to: 

•  ensure that businesses are aware of the program and can access it as easily

   as possible;

• administer the program with fiscal integrity by applying the legislation correctly,

   consistently and fairly, and ensuring that claimants receive the full amount 

   which they are entitled. 

 

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How could the SR&ED program benefit your company?

 

The SR&ED program can provide financial incentives by helping to: 

• fund the scientific and technological advances that keep your company

   competitive and 

• better position your company for future SR&ED projects. 

 

You may be able to deduct SR&ED expenditures to reduce your tax liability in the current year or carry these expenditures forward indefinitely to reduce your tax liability in future years. You may be eligible to receive benefits in the form of a refundable investment tax credit (ITC), a reduction of taxes payable, or both. Unused ITCs may be carried back three years or carried forward 20 years if they were earned in tax years ending after 1997 (carried forward ten years if they were earned in tax years ending before 1998).

 

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What is SR&ED?

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The definition of “scientific research and experimental development” given in subsection 248(1) of the Income Tax Act can be summarized as: …systematic investigation or search carried out in a field of science or technology by means of experiment or analysis to advance scientific knowledge or to achieve technological advancement. The work must fall into one of the following categories: 

• Experimental development – This is the work done to achieve technological

   advancement for the purpose of creating new, or improving existing, materials,

   devices, products or processes. 

• Applied research – This is work done to advance scientific knowledge with a

   specific practical application in view. 

• Basic research – This is work done to advance scientific knowledge without a 

   specific practical application in view. SR&ED can also include other work that is

   directly in support of the experimental development, applied research or basic

   research. 

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What projects qualify for the SR&ED program?

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In order to qualify a project as SR&ED work the following five questions must be asked:

 

Q1: Was there a scientific or a technological uncertainty? What problems did you encounter that couldn't be solved by applying knowledge generally-available in your field?

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Q2: Did the effort involve formulating hypotheses specifically aimed at reducing or eliminating that uncertainty? How did you decide to resolve your problems?

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Q3: Was the overall approach adopted consistent with a systematic investigation, including formulating and testing the hypotheses by means of experiment or analysis? We'll describe your systematic investigation.

 

Q4: Was the overall approach undertaken for the purpose of achieving a scientific or technological advancement? What have you learned that you didn't initially understand? As a result of your experiments, what do you know that your competitors don't?

 

Q5: Was a record of the hypotheses tested and the results kept as the work progressed? The CRA expects timesheets showing hours your personnel worked and their activities.

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If the answers to the above five questions are affirmative, the project qualifies as SR&ED work.

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What work can be included in Experimental Development?

 

Experimental development: Work that’s done to achieve technological advancement. Any work that’s done to help you develop new products, materials, devices or processes – or improve existing ones – would fall into this category. Experimental development is by far the most common type of SR&ED work. There are eight categories of support work also covered by the program. You can claim these expenses as long as they are commensurate with the needs of the core SR&ED project:

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   ● Engineering
   ● Design
   ● Operations research
   ● Mathematical analysis
   ● Computer programming
   ● Data collection
   ● Testing
   ● Psychological research.

 

The support work to be claimed must correspond to the needs of the experimental development, applied research or basic research performed. The following work is not eligible for benefits under the SR&ED program.

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   ● Market research or sales promotion
   ● Quality control or routine testing of materials, devices, products or processes
   ● Research in social sciences or the humanities
   ● Prospecting, exploring or drilling for, or producing minerals, petroleum or natural gas
   ● Commercial production of a new or improved material, device, product or process
   ● Style changes
   ● Routine data collection

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How can Sonad Corporation help you?

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We bring an in-depth knowledge of the SR&ED program to clients by offering the following services in all Canadian jurisdictions:
 

• SR&ED claim preparation - we identify eligible SR&ED activities applicable to your operation, seeking to maximize your claim & ensure compliance with CRA requirements. We will work with your team to gather documentation, develop project descriptions and the overall framework for your claim.

• SR&ED documentation review & guidance - we help clients implement improved methodologies to ensure technical and documentation requirements are met for current and future claims.

• SR&ED claim defense - with a confident understanding of program guidelines, we can negotiate and resolve disputes with CRA to help clients achieve the best outcome.

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From both a technical and financial perspective, we will evaluate the current project environment and make recommendations about how to maximize your SR&ED incentive. By staying abreast of the constantly evolving program standards, we ensure client filings adhere to CRA requirements and are well represented during the entire process.

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CONTACT US TODAY

 

Schedule a free 60-minute consultation to discuss how your business can maximize its financial support for SR&ED. Our aim is to be a valued partner so you can focus on what you do best - growing your business.

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