The Government of Canada encourages enterprising startups that conduct research and development activities in tandem with the eligibility requirements of the Scientific Research and Experimental Development (SR&ED) program. If you want to know whether or not your business meets the SRED eligibility in Edmonton, keep reading!
The SR&ED initiative was created to assist those individuals, proprietorships, trusts, corporations, and partnerships that invest in R&D activities in Canada. These will gain access to such incentives, provided their application passes a CRA (Canada Revenue Agency) review. The program has funded similar entrepreneurial pursuits in the past to the tune of over $3 billion dollars! The government’s infrastructure to fund SR&ED initiatives is massive as about 25,000 businesses put in their papers for these credits annually.
Regardless of size, sector or field of technology within which these activities are conducted, your startup may qualify to apply, provided it meets other parameters laid down by the CRA.
Companies in Canada can already access corporate tax provisions, however, the SR&ED tax credits, as well as the provincial tax credits, are an added bonus. They allow for a complete deduction of those R&D expenses incurred by your firm from the business income.
Being the largest federal tax program in the country, there is a very strict yardstick by which the CRA measures your SR&ED eligibility. If the work is considered to bring in improvements in existing processes, products, methodologies, principles or materials, you may well qualify for the incentive.
To put it plainly, there are three main criteria that you should keep in mind with regards to SR&ED work eligibility:
If your startup is carrying out activities in relation to experimental development, the inferences produced therefrom should advance the existing understanding of those technologies that your work focuses on.
In short, the work will only be eligible if the new and improved device, material, process or product embodies sufficient technological advancement. The work should have elevated the technological level that existed at the start of the project.
This parameter dictates that your work should have addressed any technological unknowns/uncertainties/obstacles. Even if you could not solve these problems by using procedures, techniques, and information that can be reasonably accessed by you, you should have sufficient proof as to why these obstructed the flow of your SR&ED work.
This entails following logical methodologies and pursuing a reasonable progression of events. Your work must be systematic in that it flows from identifying, articulating the technological or scientific unknowns, formulating a hypothesis, testing and experimenting and drawing an inference.
Even at the very outset of your project, you should have stated, in no uncertain terms, the perceived evolution of the process and the plan you have in place to address potential uncertainties or hurdles – which must involve experimenting with or analyzing available data.
– Experimental development
– Basic research
– Applied research
– Work that supports experimental development, basic research, applied research
The supporting work entails the following:
– Operations research
– Mathematical analysis
– Data collection
– Computer programming
– Psychological research
– Sales promotion activities
– Marketing research
– Routine testing of materials, processes, products or devices
– Quality control
– Humanities or social science research
– Commercially producing an improved or a new product, process, material or device
– Routine data accumulation
– Style alterations
– Drilling, prospecting for, exploring or producing natural gas, petroleum or minerals
– Remuneration for those employees directly undertaking the SR&ED project
– Overhead costs
– Cost of materials for the SR&ED project
– Capital expenses like machinery, buildings, and equipment
However, in the above case, the capital is deductible from the income of your business as a depreciation (capital cost allowance) expenditure.
At CI Solutions, we help you prepare an airtight SR&ED application so that you get a CRA approval as quickly as possible! Call (416) 477.5569 to get started.