Why don’t more companies take advantage of SR&ED?
Here are some of the top considerations Canadian business people have about applying for SR&ED tax credits:
1. “It’s too complicated and time consuming to be worth it.”
Is a cash refund of $30,000 – $2,000,000 worth something to the yearly cashflow of your business? If you have a SR&ED Engineer look at your claim, their may be a lot less time commitment than you think.
2. “We don’t do R&D, so we don’t qualify”
Since common activities either in the shop or other industrial settings contain elements of research and development processes, any incremental improvements in designs, formulations, or other activities can be eligible. This can include changes in quality, durability, energy effectiveness, and the materials used.
3.“No one here has a PhD, nor do we have a state-of-the-art-lab”
You don’t need either. R&D activities can be either integrated or extracted from daily work regimens, as long as there is a technological advance, technological obstacles overcome, or an increase in knowledge capital.
4.“We did not have any taxable income last year.”
Your company does not have to be profitable! You can still get a refundable tax credit even if you did not pay taxes.
5.“The work we did is not that new.”
The eligible work only has to be new to your organization, even if advanced processes exist elsewhere (ie.with your competitor). If you experienced technical challenges and tried to resolve those challenges systematically, you may be eligible for SR&ED.
6.“In the end, what we did was not that difficult.”
Technical people will often downplay a challenge after it has been resolved, and this is only natural. The key to SR&ED is to document the process leading to that resolution, and emphasize the difficulties encountered beforehand.
7. “We did not have any success with our project.”
Even if the project has been abandoned or postponed, there are “lessons learned” and man-hours applied to solving the challenges. Technological or commercial success is not necessary!
8. “We claim IRAP already.”
You can claim SR&ED as well.
9. “Almost all of our R&D is subcontracted.”
If you subcontract to Canadian taxpayers and retain intellectual property of the work performed, you can still be eligible for SR&ED.
10. “We may be audited by Revenue Canada if I apply for SR&ED!”
SR&ED reviews and CRA audits are separate. SR&ED is a program that encourages innovation in Canada, and is treated separately from other CRA activities.
In any case, reduce your risk by having a SR&ED Engineer help you and your accountant maximize your claim and avoid having your claim challenged.
Leave a Reply