We've all heard about them, SR&ED Credits. What are they, what can they do to help offset the costs of my startup and how can I use them?
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Research & Development tax incentives
The Canadian Scientific Research & Experimental Development (SR&ED) program rewards this group with some of the most generous incentives in the world. BDO can show you how to access them. When you are trying to develop or improve your business’s products or processes, consider how much money you are currently leaving on the table. The SR&ED program’s tax incentives may apply to activities in which you are already taking part. Under Canadian tax law, the key benefits of qualifying SR&ED expenditures include:
•Eligibility for investment tax credits (ITCs) that, federally, can reach up to 35% of eligible expenses may reduce tax payable or, for certain Canadian-controlled private corporations, even be fully
refundable in cash.
•A full tax deduction in the year the expenditures are incurred, which may even apply to research and development capital assets that are not just for regular commercial use.
•The ability to “pool” SR&ED expenditures, enabling you to carry forward these deductions indefinitely, to the extent that they are not currently needed.
•Most provinces offer additional incentives for qualifying activities that increase the benefits of filing a claim, such as effectively combined federal and provincial rates on labour, which can often exceed two-thirds of the underlying costs with proxy overheads added.
SR&ED activities are not limited to those that occur in a traditional research lab. In fact, most claims are for experimental development – which often takes place right on the shop floor. A project may start
in a lab, but is almost never completed there.
Are you eligible?
If yours is one of the many companies that have yet to apply for this innovation-based tax program, you could be missing out on significant amounts of tax refunds or credits. Is your company:
•Developing a new product or process?
•Improving an existing product, or your methods or processes?
•Working to reduce the environmental impact of your manufacturing process?
•Working on the next generation of your technology?
The claim preparation process involves:
•Determining the eligible projects and the activities within them
•Preparing a technical report to describe the project
•Identifying the eligible costs that relate to the work
•Completing and filing the tax forms and technical report
BDO’s SR&ED services
We offer many specialized services beyond year-end audits of financial statements, including assistance with SR&ED claims. Our team is comprised of engineers and scientists who can help you with both parts of the claim and ensure you receive the ITCs to which you’re entitled. We mentor our clients to ensure they meet the program requirements, file the necessary forms and reports, and ultimately improve their chances of success with the SR&ED program. Successful companies then have the ability to allocate further funding to research and development activities on an ongoing basis.