Frequently Asked Questions About SR&ED

Q1:           “My business isn’t rocket science.  Would it qualify?”

                 Any manufacturing field, as well as information technology and all of the physical sciences can qualify.  There are a number of exclusions regarding the types of expenses and work that is claimable, but generally any expense that supports purposeful experimentation is considered.

 

 

Q2:           “So I can claim my design and process engineering team, or the continuous improvement program?

                 No.  Expenses are approved on a project-by-project basis.

Q3:           “What is a qualified SR&ED project?”

                 A SR&ED project must have technological uncertainties or obstacles, resources spent trying to resolve those uncertainties by trying different approaches, and a technological advancement as a goal.  This last one could be learning what NOT to do, in practice.  The objective can be an improvement (even an incremental one) in your product or process.  You don’t have to be  the first to achieve the advancement, but the lessons learned should be proprietary.  If you’d share it all with your competitor, it’s probably not what CRA is after.

Q4:           “Is there a limit to the number of projects I claim, or the size of my claim?”

                 There is no limit to the claim or the benefit, unlike grant incentives.  Also, unlike other technology incentives such IRAP and SMART (an Ontario program), your SR&ED claim does not compete with other claimants for funding.  As long as you can convince CRA that it meets the requirements then you will get credited.

Q5:           “When do I submit a claim?”

                 SR&ED claims are submitted with your corporate tax return.  Only expenses incurred in a fiscal year can be claimed for that fiscal year.  You have up to 18 months after a fiscal year end to file.  This means your first claim might be for the last 2 fiscal years, amending the first.

Phone: 905-481-2228

E-mail: info@incretech.ca

Q6:           “If I submit a SR&ED claim, might it result in a general audit?”

                 I have never had a case where a client’s SR&ED claim has led to a general tax audit.  All claims get reviewed by both a technical and a financial reviewer at CRA, however.  Often, they conduct site visits to review the projects in person, though the trend is toward bench reviews.

There are volumes of SR&ED program information available at the CRA web site.

Please contact IncreTech if you have any other questions or if you would like to arrange a free no-obligation consultation.  There’s nothing to lose.

 

 

SR&ED is available to all Canadian manufactures and many service companies.

@ 2008-2013 IncreTech

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Q7:           “I have heard that the federal government is cutting back on its R&D incentives.  Is filing                  still worth it?”

                 The 2012 federal budget resulted in major cuts to the SR&ED incentive, though the larger impacts were on large, public, or foreign owned corporations.  Companies of these types saw their credit rate drop from 20% to 15% for fiscal years ending after Dec 31, 2013.  As well, R&D assets like lab equipment and test devices are no longer be eligible expenses for credits after this date.  Eligible subcontracted expenses have been reduced 20% as of Jan 1, 2013.  Overhead (proxy method) allowance has been reduced from 65% of direct labour to 60% on Jan1, 2013, and further to 55% in 2014.  The small Canadian owned credit rate remains unchanged at 35%, so if yours is of this type  and not in a capital intensive high tech field, then the changes are fairly minor.  However, they will result in significantly reduced incentive for multinational companies to locate development branches in Canada. 

IncreTech Corp.

SR&ED (R&D) Investment Tax Credit Consultants.