There seems to be a lot of misinformation floating around about the SR&ED program, according to Jeffrey Johnson, the Technology, Media and Telecommunications (TMT) leader for the National Capital Region (NCR) for Deloitte. Some people think the program is “dying”, and others have heard of cutbacks, but the reality is up to 64% of labour costs can be claimed, if the project qualifies under the Act. Also, FYI, getting a claim approved is not “luck”!
Well-written SR&ED descriptions, which clearly make the case for eligibility, greatly increase your chances of success. To write such a description you must obviously understand what is and isn’t eligible. As a founder you are naturally proud of your product and its ability to meet a need for your clients. But being innovative in meeting a business need isn’t necessarily SR&ED. It is critical that you base your claim on technical uncertainty, not on business risk or innovation. Note that claims in the fields of social sciences are specifically disallowed by the legislation.” – Jeffrey Johnson, Deloitte
Here are the CRA’s eligibility criteria:
Scientific research and experimental development means systematic investigation or search that is carried out in a field of science or technology by means of experiment or analysis and that is
(a) basic research, namely, work undertaken for the advancement of scientific knowledge without a specific practical application in view,
(b) applied research, namely, work undertaken for the advancement of scientific knowledge with a specific practical application in view, or
(c) experimental development, namely, work undertaken for the purpose of achieving technological advancement for the purpose of creating new, or improving existing, materials, devices, products or processes, including incremental improvements thereto,
and, in applying this definition in respect of a taxpayer, includes
(d) work undertaken by or on behalf of the taxpayer with respect to engineering, design, operations research, mathematical analysis, computer programming, data collection, testing or psychological research, where the work is commensurate with the needs, and directly in support, of work described in paragraph (a), (b), or (c) that is undertaken in Canada by or on behalf of the taxpayer.” – CRA Website
More from the CRA website here.
See Jeffrey Johnson’s complete article: “Decoding SR&ED – What Your Cash Hungry Startup Needs to do to Become Eligible” here.
Photo courtesy of Ryan McGuire
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