If your company’s core focus involves R&D work, your expenditures are probably soaring high. The continuous process of testing against ever changing performance indicators and enhancing your product involves stable financial sourcing. Before you release your product to the market and gain capital returns, consistent product enhancement and development remains critical. In order to encourage these projects, the Canadian Government has already invested in your company and brand by providing one of the most generous R&D cash refund/tax incentive programs in the world. The program provides more than $3 billion in tax incentives to over 20,000 claimants each year.
This massive tax incentive program is known as the Scientific Research and Experimental Development program. It’s also known as SR&ED, some call it ‘shred’ and others call it R&D Tax Credit, Research Tax Credit, Research & Experimentation Tax Credit, Investment Tax Credit and R&D Funding. Be sure to not get lost in the names!
When combined with other provincial program, your business may recover up to 68% of the qualified cost. It’s surprising but doable, and at EVAMAX we’ve seen it happen. These tax incentives come in 3 forms:
- Reduction of taxes
- Investment Tax Credit
- Cash Refund
These 3 types of research methods are qualified under the SR&ED program:
- Basic Research: Work done to advance scientific knowledge without any practical application in mind
- Applied Research: Work done to advance knowledge specifically for a practical purpose
- Experimental development: Work done to achieve a technological advancement to create new or improved existing products, processes
The SR&ED program’s success rates are perceived as too good to be true, resulting in these common misconceptions:
- The SR&ED high tech sector and for highly intensive and critical R&D only – so I can’t claim any benefit
- It only has benefits for larger corporations and not small businesses
- Your R&D work was not successful
- You don’t pay taxes, how can I get a credit
- Your I don’t have time for all paperwork
Here are those misconceptions debunked with facts about the SR&ED Program:
- Any industry can get the benefit of SR&ED program if there has been an attempt for a technological improvement/advancement.
- These benefits include not only the research cost but also wages, capital expenditures and overheads
- The more incentives for small companies then larger corporation
- Your company can get a refund even if the experimentation failed
- You can receive a refund even if you have not paid taxes or declared loss
- It is about the expenditures, not about the sales you make
- The program is more technical than financial
Want to know if you qualify? If you are a Proprietorship, a Partnership, or a Corporation having a business in Canada then you are likely to quality for the SR&ED program.
Here are some unexpected activities that qualify for SR&ED:
- Enhancements, efficiency issues, new product development
- Methods to make products cheaper/faster/better/durable
- New formulations, new designs, innovations
- Risk, uncertainty, unproductive time or material
- Material changes, inconsistent product or quality issues
- Reduction in labour and resources needed
- Integration issues, new algorithms, software structures and tool
If you are looking for assistance in creating your company’s submission, contact us to help you through the process. At EVAMAX, our team believes in maximizing our clients benefits to the fullest potential. Our approach does not use a “one formula fits all” policy, we assign industry specialists to work with you, ensuring successful identification of eligible projects and costs. Feel free to reach out to us today, for a no obligation consultation!