The 7 most important facts that you need to know about the SR&ED program

WHAT IS SR&ED
SR&ED (Scientific Research & Experimental Development) is the government’s largest technology-based funding program in Canada and one of the leaders worldwide. Unfortunately, many companies get dazed with the scientific term “SR” and miss on the experimental part “ED” where the latter encompasses more than 95% of the SR&ED claims. The most common myth associated with the program is that applying companies need to have a formal lab setting with white coat scientists, need to have a patent application in process, or that simply applying for incentives might trigger other government related audits. All of these points are simply not true.  

So, what’s Experimental Development? In government language it’s the “systematic investigations carried out to overcome a technological obstacle in the field of science or technology by means of experiments or analysis…etc.”  In layman’s term, it’s what the industry generally calls “trial & error”. Unfortunately, not all businesses that could be conducting qualifying “Trial & Error” activities in Canada apply for such incentives thus losing a significant leading advantage in their field. In other words, your competition is probably applying and collecting such incentives while you are still debating whether you should explore such funding venue or not. Here are the 7 most important facts that you need to know about the SR&ED program. 

1. The SR&ED program is part of the income tax act and is designed to help Canadian companies maintain a global competitive edge where it’s becoming more and more evident that we can’t compete with overseas cheaper labour rates. Such incentives will help ease the cost on companies of developing new products or processes. 
2. SR&ED activities for small and medium-sized businesses are usually part of your day-to-day business activities, meaning that SR&ED could be carried out on the production floor during your trial & error.  
3. The general rule is that all businesses permanent established in Canada can claim a non-refundable Federal tax credit equal to 15% of eligible SR&ED expenditures. However, for qualified CCPC (Canadian Controlled Private Corp), the credit can be as high as 35% refundable from the Feds only. 
4. In addition to the federal tax incentives, most provinces have their own SR&ED tax incentives that businesses can take advantage of. Depending on the province, a provincial incentive up to 15% in the form refund or tax credit is added on top of the 35% Federal refund. With that said, a company spending $100,000 in new development could get more than $40,000 refund “Government Math!”. 
5. A company can apply for SR&ED tax incentives within 18 months from the end of the tax year in which the SR&ED expenditures were incurred. Meaning companies can still claim SR&ED expenses incurred in their last fiscal year. 
6. The CRA service standard to review and administer the SR&ED program for current files “SR&ED claims submitted with company’s tax return” is 120 days. Meaning you could get your refund within a week to 4 months of your submission. On amended tax returns, 240 days is CRA service standard. 
7. Yes, companies can utilize the credit or the refund to offset any outstanding tax account such as payroll taxes, HST and income tax. You can also opt to carry over and use when needed. 

   Teck Capital not only finances SR&ED claims but we also we work with consultants that have  
   long standing records of successful SR&ED claims.