Scientific Research and Experimental Development (SR&ED) Tax Incentives
What is SR&ED?
- The Scientific Research & Experimental Development (SR&ED) program is an incentive program administered by Canada Revenue Agency (CRA), designed to encourage research, development, and innovation within Canada.
- Canadian businesses making advancements in scientific knowledge or technology are eligible to claim thousands of dollars in non-refundable or refundable SR&ED tax credits.
- Each year, CRA receives claims from over 18,000 companies, of which 75% are small companies whose claims for R&D expenditures generally range from $20,000 to $2,000,000.
- Overall, federal and provincial SR&ED funding has now reached nearly $6 billion annually. In particular, Quebec SR&ED credits represent almost 60% of the provincial credits ($689 million).
Table of Contents
Why Apply for SR&ED?
According to the Income Tax Act (Section 37, 127, subsection 248(1), and regulations 2900-2903), as an entrepreneur, your small business is entitled to these government incentives.
- The SR&ED program is Canada’s largest single source of federal government support for industrial R&D.
- You’re involved with innovation or R&D. As a result, your work may qualify for a generous refund cheque and/or a tax reduction.
- Similarly, think of it as an interest free loan, worth thousands of dollars, that you’ll never have to pay back!
- Evidently, entrepreneurs with a corporation acquiring less than $800,000 in taxable income and expenditures up to $10 million will benefit substantially.
- Above all, achieving a series of small goals will let you realize your big target. Without a doubt, small “wins” accumulate!
In other words, SR&ED can take your business to the next level. We can help you achieve your financial goals by:
-> Implementing ‘Smart-Money’ business strategies that generate a new stream of income, via phantom expense cash flow.
-> Maximizing capture of your incentives with greater certainty.
-> Recapturing expenses that qualify for your experimental work, back into your business.
-> Locking in more financing for your business, since banks and other lenders will find your business more attractive and willing to finance, against SR&ED benefits.
-> Enhancing your bottom line through refund cheques from the government, whether your business is in a profitable or non-profitable position.
Who Can Claim SR&ED?
- Eligible businesses must conduct scientific research and development in Canada, for the purpose of scientific or technological advancement.
- Scientific Research (SR) consists of basic research for a general gain of knowledge, and applied research for the purpose of solving a specific problem. For example, clinical trials, academic researchers, and medical practitioners doing basic or applied research.
- Experimental Development (ED) involves either the creation of new or improved products and processes. For instance, qualifying activities can include anything that involves new product development or improvement to existing products. It can also include new process development, or improvement to existing processes.
- Any entrepreneur in Canada can claim up to 35% in SR&ED tax credits overall. Although, specific rates, expenditures, and requirements will vary according to your region.
To clarify, more details about SR&ED eligibility and regional requirements can be found in our free SR&ED guide below.
On the other hand, some common base rates of eligible expenditures are…
up to
68.5%
up to
41.5%
up to
41.5%
STAFF WAGES
SR&ED CONRACTORS
MATERIALS
In addition, these eligible costs can be claimed:
Lease costs (excluding building leases, or rent)
Certain overhead costs related to SR&ED, or a proxy for these costs
Third party payments to universities and colleges
How Can R&D/Government Funding Specialists Help?
According to the Income Tax Act (Section 37, 127, subsection 248(1), and regulations 2900-2903), as an entrepreneur, your small business is entitled to these government incentives. Likewise, your competitors are getting refunds. Are you?
As reported by the CRA Redbook, 19,783 claims were filed across Canada, and $4.277 Billion in SR&ED tax incentives were recouped by November 2020. For this reason, it’s quite likely that your business competitor is already taking advantage of these incentives. So, DON’T MISS OUT!
Work with us to…
DECREASE AUDIT RISKS
INCREASE CLAIMS (+10-45%)
Want to Double Your Cheques From the Government?
When we work with you, your business maximizes capital by:
Ensuring your small business uncovers all possible funding opportunities, including additional provincial/territorial incentives.
Getting back up to 35% of your R&D costs that would help you finance other ongoing projects.
Achieving further complementary incentives related to R&D. For example, the Industrial Research Assistance Program (IRAP) valued at $15,000 and up to $500,000, or related to your industry sector.
Excitingly, you can now get funded as a small business entrepreneur before your industrial research project starts!
Obtaining other government rewards from agencies like the Ontario Media Development Corporation (OMDC), for activities not related to R&D, such as marketing.
Helping secure funds from Innovation Demonstration Fund (4 year, $24 million fund) through the Ministry of Research & Development.
Growing your business globally through the Ministry of Small Business & Entrepreneurship.
How to Claim SR&ED
First, it’s imperative to determine what research and development work in your company qualifies as SR&ED. To start, we would recommend assigning the person in charge of R&D in your organization to be responsible for describing the work and technical information. In addition, the person responsible for financial matters should identify the associated costs and expenditure details.
To begin the filing/application process, you must:
- Complete form T661, Claim for Scientific Research and Experimental Development (SR&ED) Carried out in Canada.
- Complete accompanying schedules, including T2 Schedule 31, Investment Tax Credit – Corporations.
- Finalize the necessary provincial forms, if applicable.
- Afterwards, complete the technical report satisfying three criteria, including ‘Technological Uncertainties’, ‘Technological Advancements’, and ‘Scientific or Technical Content’.
- Gather proof of documentation supporting your SR&ED claim activities.
- Then, file these forms up to 18 months past the end of the taxation year in which you incurred the expenditures.
Lastly, the application must be processed and accepted by the CRA. Moreover, the type of claim will influence the length of processing time, as seen below.
3-4 Months
For SR&ED filed with T2 corporate returns. Usually processed within 120 days of CRA receiving it.
12 Months
Non-refundable claims can take up to 365 days.
6-8 Months
Claimant-requested adjustments to refundable claims can take up to 240 days.
Ultimately, application processes for other complementary incentive programs will vary. Therefore, always verify that you fulfill your application requirements according to your program.
What We Offer
Altogether, when your small business meets our big expertise, it’s a win-win all around by:
-> Applying our expertise in quickly and consistently delivering these incentives to companies that carry out eligible work. We are proud of our 100% success rate.
-> Infusing substantial cash-flow into your business.
-> Offering the best service at competitive prices.
-> Promoting government programs that stimulate entrepreneurs with small businesses.
-> Capturing support work that is directly commensurate with the needs of experimental development (as defined in application policy AP1996-06), such as the following:
- Included
Engineering
- Design
- Operations Research
Mathematical Analysis
- Computer programming
- Data collection
Testing
- Psych. research
- Excluded
Research in social sciences or humanities
Commercial production or processing of new/improved materials, products, devices
Style changes
Market research or sales promotions
Quality control or routine testing
Routine data collection
Prospecting, exploring, drilling for minerals, petroleum, etc.
Got You Interested?
In short, don’t worry if you didn’t grasp everything, our experts will simplify the process and make it easy for you. We’ll show you why it should be fun for entrepreneurs to get money from the government and re-invest back into their small business. So, let us help you attain your goals and make your dreams possible!
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CONTACT US
Tax Incentives Made Easy (TiME) Consulting Group Inc.
” 95% success. 15+ years expert SR&ED credits and gov. grants for your business innovation.”
Phone: +1(647) 709-6368
E-mail: gshah@timeconsulting.ca
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