What is the Scientific Research and Experimental Development Tax Incentive Program (SR&ED) and how can I take advantage of it?

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Special thanks to guest author, Bikram Johal

What is SR&ED?

The Government of Canada’s Scientific Research and Experimental Development Tax Incentive Program (SR&ED or SRED) is a tax incentive program that was developed to inspire research and development (R&D) in Canada.

SR&ED is the largest source of federal government support providing over $3 billion worth of investment tax credits (ITCs) to approximately nearly 22,000 Canadians every year.

Most people are doing SR&ED because they are working on creating a new, or improving an existing: material, device, product or process.

R&D needn’t take place in research lab or be high techit can take place anywhere in your facility and simply needs to have a goal of providing a solution not yet documented.

Success or failure is irrelevant. The funding is there for the takingare you going after it?

What determines SR&ED eligibility?

Nearly 100% of SR&ED claims involve experimental development, not scientific research. To qualify for the tax incentive, five criteria must be met.

  1. Was there a scientific or a technological uncertainty that could not be removed by standard practice/engineering?
  2. Did the effort involve formulating a hypothesis specifically aimed at reducing or eliminating the uncertainty?
  3. Was the adopted procedure consistent with the total discipline of the scientific method, including formulating, testing and modifying the hypothesis?
  4. Did the process result in a scientific or technological advancement?
  5. Was a record of the hypothesis tested and results kept as the work progressed?

Taking advantage of SR&ED

In today’s wildly competitive marketplace, companies must remain competitive by enhancing their products and services, and continuously providing new offerings. It’s imperative to constantly be looking for ways to decrease manufacturing costs and time and improve processes.

Taking advantage of SR&ED incentives means you could qualify for up to 64% of refundable tax credits of your eligible expenses. That $100 you just spent to improve your manufacturing process? The government just might put $64 back in your pocket.

Getting SR&ED credits

As with any government tax credit, there are a number of forms and documentation required. Our recommendation? Work with a professional with proven experience in applying for and successfully receiving SR&ED credits.

Here’s what you’ll need to apply and how we can help:

  1. We’ll help determine if you qualify for the SR&ED program and educate you on the program requirements
  2. If you do qualify, we’ll work with you to gather the required documents to support your claim
  3. We’ll build your case and maximize your SR&ED benefits
  4. Complete a final review with you before submitting the SR&ED application to Canada Revenue Agency
  5. If Canada Revenue Agency decides to review the claim, we will minimize your involvement and defend your application
  6. We only get paid when you receive a benefit from the SR&ED program
  7. For future applications, we work to better document your qualifying research and development strengthening your application and maximizing your program benefits

Interested in learning more? Let’s connect and discuss Canada’s Scientific Research and Experimental Development Tax Incentive Program.

Bikram Johal is the Principal of Banhall Consulting.  The team at Banhall focuses solely on SR&ED claims for small and mid-sized businesses. The teams knowledge extends across a diverse range of fields, including, but not limited to software engineering, manufacturing, agriculture, and other life sciences. You can contact Bikram at bjohal@banhall.com or at 604-496-1557 ext 9359.

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