Every year the federal government awards approximately $4 billion to Canadian companies making Scientific Research & Experimental Development (SR&ED) claims. The SR&ED program is a valuable tax credit incentive for businesses advancing the technological base within Canada. Even an incremental improvement can qualify for the program, however the SR&ED program can also be complicated and confusing for those new to the program. As a result, many potential refunds and tax credits have gone unclaimed simply due to low levels of awareness of the program, or potential claimants being unsure of what qualifies or how to properly submit a claim.
Recent scrutiny by the Federal government has resulted in greater public attention for the program and revisions to the program that ultimately affects eligible expenditures and claim amounts. These changes have immediate consequences for claimants, but are intended to keep the program viable for the future. Despite the potential reductions in benefit to claimants, the Canada Revenue Agency (CRA) has demonstrated a renewed commitment to the longevity of the program and as such, to promoting Canada as a world-leader in scientific innovation and technological advancement.
A number of new initiatives by the CRA have been released that provide additional program support for claimants. For example, CRA has provided additional guidance around eligibility requirements via online resources and pilot projects to help identify opportunities to improve efficiencies of the program and predictability for claimants. One key aspect that has been reiterated for ensuring a successful claim, is the need to document the experimental efforts and effectively describe the project objectives and ensuing efforts. This doesn't need to be onerous – as a matter of fact, you may already be generating the necessary documentation as part of your existing internal processes.
Despite the recent changes, the program remains a viable source of funding for many small to medium sized businesses that are actively expanding the technology base of our country. By re-investing the benefits of the tax credit refunds in what could be a riskier technology initiative, they are able to continue breaking new ground in their respective industries – and that is a good thing for us all.
Eligible activities may be integrated with your everyday business activities – are you taking advantage of these?
Do you have processes in place to proactively identify eligible projects at the time they are initiated so that you can maximize the benefits available with the program?
If you're currently taking advantage of the SR&ED program, are you receiving the full benefit that you're entitled to and have you integrated this with your existing tax planning strategies?
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
