It stands for Scientific Research and Experimental Development - a tax incentive program designed to support Canadian businesses, partnerships and individuals to perform scientific research and experimental development in Canada. Regardless of its size and sector, any Canadian business that engages in SR&ED work which complies with the qualified parameters, can apply for these tax incentives.
SR&ED program has two benefits: First, it allows you deduct SR&ED expenditure from income for taxes purpose. Second, it gives you an SR&ED ITC (Income Tax Credit) which can be utilized to reduce income tax payable calculated under the Part I of the ITC, if any. The remaining ITC can be refunded in some cases. While computing the business income for the tax year, the taxpayer who runs a business in Canada can subtract SR&ED expenditures in line with the Act.
You can use the CRA’s SR&ED Self-Assessment and Learning Tool (SALT) to understand the eligibility requirements and get practical guidance on how to get started. It will help you understand what SR&ED is exactly, the requirements for the eligibility of your work, figuring out if your company’s project includes SR&ED work, the extent of eligible work that has been performed, and estimate the associated expenditures and your ITC. The tool is essentially classified into 2 interactive PDF files which you can download on your computer and start using it.
Any Canadian-controlled private corporation (CCPC), other corporation, individual and trust, and member of a partnership can earn a refundable ITC on qualified SR&ED expenditures, given they meet the eligibility criterion.
A CCPC can earn a refundable income tax credit at the rate of 35% on qualified expenditures, up to a maximum amount of $3 Million. For amount exceeding the threshold of $3 million, a CCPC can earn non-refundable income tax credit at the basic rate of 15%. For more detailed information, please contact CI solutions.
Yes. It is quite possible that your company project comprises more than one SR&ED projects - some focusing on basic or applied research, and some involving experimental development. The start of any SR&ED project is the point at which you identify the technological or scientific uncertainties, leading to the definition of technological or scientific objectives, in stark contrast with commercial or business objectives. Work that is carried out as a part of standard business practice doesn’t come within the scope of SR&ED project.
No. The Revenue Agency does not consider the SR&ED project’s failure or success a factor in determining the eligibility for tax credits. However, it is expected that the project work be recorded, showing how each major element is essential and how it fits into the project as a whole. It is also required that the measures which will be used to ascertain if the goals are achieved, are identified and recorded properly at the early stage of work.
A company project has a commercial purpose that will impact its business, whereas an SR&ED project is focused on the advancement of scientific knowledge or realize technological advancement in general. Usually, an SR&ED project exists as a subset of a company project.
Not all the work done in your project will necessarily come within the scope of SR&ED. It is also likely that your company has more than one SR&ED projects – some entailing experimental development, whereas others involving applied research or basic research. In certain areas, even the support work which aligns with the requirements of basic or applied research and experimental development, may meet the eligibility criteria of SR&ED grants, such as engineering, data collection, computer programming, psychological research, mathematical analysis, testing, and operations research.
You must file the prescribed forms along with income tax return by the SR&ED reporting deadline: Form T661, SR&ED Expenditures Form, and Form T2SCH31 - Investment Tax Credit for Corporations, or Form T2038, Investment Tax Credit for Individuals. For individuals, the reporting deadline is 17.5 months from the end of tax year in which they incurred the expenditures, whereas for corporations, it is 18 months.
You must have evidence documents to support your claim for SR&ED tax credits. Some examples include project planning docs, experimentation plan, design and technical drawings, records of trial runs, videos, photographs, lease agreements, purchase invoices, proof of payment, samples and accounting records.
The net income, in such cases, is not calculated at the individual level, but at the partnership level. So, there is only one Form T661 for the partnership (instead of different forms for each partner). There may be instances when one of the partners is filing a claim for SR&ED expenditures incurred in a separate business which is not a part of the partnership. While filling the T5013 forms, the information filled by each member of partnership is considered to have been filled by all the members of the partnership. For more information, please contact CI Solutions representatives.
SR&ED is a federal tax incentive program administered by the Canada Revenue Agency (CRA) to encourage Canadian businesses in all sectors and sizes to perform research and development.
The CRA is committed to delivering SR&ED tax incentives in a consistent and timely manner while encouraging businesses to be mindful of the CRA’s policies and procedures and Canada’s tax laws to prepare their claims. It administers the program with fiscal integrity and ensures that business are not only aware of this program, but can access it easily.
For refundable claims, the SR&ED program takes 120 days from the receipt of a claim, and for non-refundable claims, the program takes 365 days from the receipt of a claim. For adjustments requested by claimants to refundable claims, it takes 240 calendar days from the receipt of a complete claim, whereas for adjustments in non-refundable claims, it takes 365 calendar days from the receipt of a complete claim. Some situations that may cause variations in these service standards include an incomplete claim, being unable to timely respond to CRA’s requests for information, modifications in claim during review, filing a claim at wrong tax center, or claimant's’ request to delay the claim.
Not necessarily, as long as your technical reports are comprehensive, entailing all the required technical information about the R&D activities. There are strict legislative provisions and rules in place to protect the confidentiality of claimants’ records.
To process your claim for SR&ED incentives, it will help if you mention in the final report the name of a technical contact person (involved in SR&ED work), and a financial contact person (knowledgeable about expenditures); maintain all the required technical and financial documents required to substantiate the claim and make them available upon request; and respond to all CRA requests for more information, in a timely manner. Moreover, you can contact the CRA’s financial and technical reviewers if you want to clarify the information requested.
Experimental development activities to attain technological advancement; applied research; basic research; and support work in engineering, design, operations research, mathematical analysis, computer programming, data collection, testing, or psychological research, but only if the work is commensurate with, and directly supports, the eligible experimental development, or applied or basic research. With CI Solutions, claimants are more likely to receive the full amount to which they are entitled.
It’s absolutely free. CI Solutions charges a fee in the form of a percentage of the claim amount. So that means, we only get paid when you have received SR&ED funds, our review of your business is free and no commitment is required.
No. You pay us only when your claim for SR&ED tax credits is successful. CI Solutions will work with you through every step of the SR&ED process from helping to identify SR&ED eligible projects to when you receive your tax refund.
Canadian corporations can realize up to 68% tax credits on monies expended on Research and Development efforts. Expenditures include your time, employee’s labour, materials and equipment, regardless if you have paid any tax.
Yes. CI Solutions offers its services Canada-wide, through its locations in Toronto, Calgary, and Edmonton. As a privately held Canadian company, we understand the challenges of running and growing a business in today’s economy. Our focus is 100% on helping Canadian companies identify, develop and process SR&ED claims for their business in order to receive provincial and federal refunds and/or tax credits.
No. The purpose of SR&ED program is to encourage the research and development activities in Canada. In case your company is engaged in SR&ED and has incurred certain cost while doing it, then you are eligible for tax credits, regardless of the size of your business.
Our team of well-qualified financial consultants and engineers is experienced in diverse areas like IT,chemistry, mechanical engineering and electronics. We will prepare a detailed technical report on your project, along with tax schedules and accounting reports entailing the costs associated. Our consultants offer businesses of all sizes professional services and experience to help identify SR&ED qualified projects, estimate costs and grant fund eligibility. We also look after the SR&ED applications, properly document the work for reporting SR&ED, and provide ongoing support and advice.
At CI Solutions our consultants offer businesses of all sizes professional services and experience to help identify SR&ED qualified projects, estimate costs and grant fund eligibility. We also look after the SR&ED applications, properly document the work for reporting SR&ED, and provide ongoing support and advice. We only get paid when you have received SR&ED funds, our review of your business is free and no commitment is required.
A claim evaluation questionnaire gives us basic information to assess a project and its claim potential. A technical consultant or industry expert will review your activities for development work and eligible expenditures. If positive indicators exist, the technical consultant will conduct a technical evaluation. A financial consultant will then conduct a review of the financial documentation. At that time, CI Solutions will confirm there are eligible expenses and will review areas of your financial documents required for the support of the technical evaluation. CI Solutions will review the entire draft submission with corporate management. CI Solutions representatives, when necessary, will attend meetings with government officials including consultations with respect to project eligibility.
CI Solutions will assist in any and all negotiations on the Client’s behalf. After Step 3 is completed, an informed decision to proceed with an SR&ED claim can be made. You now have an expert opinion as to the technical merit of the project and a qualified estimate of the potential claim amount.
If you and your SR&ED consultant find that you disagree with the RTA’s decisions, you can register these disputes with the CRA. For this, the CRA’s commitment is to resolve disputes at appropriate levels, escalating claims only to the Assistant Director for SR&ED at the final stage.