Many competing Canadian businesses use various resources to their advantage, one of which is devoting significant resources to the scientific research and experimental development (SR&ED) of new products and processes. Some may wonder if they are eligible for government grants through SR&ED, but before getting into the nuts and bolts, it is important to get a clear understanding of what it is all about. This program is the largest source of Federal government endorsement for research and development in Canada. The CRA uses multiple questions and criterias to determine SR&ED eligibility.
Benefits for qualifying for SR&ED government grants
There are three substantial benefits for qualifying in SR&ED expenditures. First being a full tax deduction in the year that such expenditures occurred, the ability to pool SR&ED expenditures (enables you to carry over deductions to the extent that they are not needed currently) and eligibility for appealing investment tax credits (ITCs), which can be refundable in cash. The Federal government provides a refundable tax credit at a rate of up to 35%. These factors can be used to your benefit if you hold the opportunity to qualify.
Applying for SR&ED incentives
In order to figure out if you are a qualified member for those grants, you will first need to apply for SR&ED tax incentives. The applicable forms must be filled out by the deadline stated. Keep in mind that for corporations, the reporting deadline is 18 months from the end of the tax year in which the SR&ED expenditures were incurred. It is very important to remember that all of the required information, including necessary project reports, must all be filed within the given timeframe. Failure to do so, will result in not being able to include the amounts in the pool of deductible SR&ED expenditures to use to decrease taxable income and you will lose the ability to claim an ITC on these outlays.