The Benefits of the SR&ED Tax Credit Program
The Scientific Research & Experimental Development (SR&ED) tax credit program is a Canadian government initiative that encourages businesses, large and small, to invest in research and development (R&D) in order to develop new or improve existing methods, processes, services, and products. By taking advantage of the SR&ED Tax Credits, eligible companies may receive up to 70% of their eligible R&D expenses as a refund from the Canadian Revenue Agency (CRA), along with full tax deductions in the year they are incurred. Eligible expenditures include salaries and subcontractor fees as well as materials.
There are numerous benefits to taking part in the SR&ED tax credit program which include:
- A full tax deduction in the year that such expenditures are incurred;
- The ability to pool SR&ED expenditures for carrying over deductions not needed currently; and
- Eligibility for attractive investment tax credits (ITCs), which can be refundable in cash if you don’t need them to reduce current taxes payable.
In order to determine whether an activity qualifies as SR&ED under Canadian tax rules, businesses must take into account five key questions:
- Was there a scientific or a technological uncertainty?
- Did the effort involve formulating hypotheses specifically aimed at reducing or eliminating that uncertainty?
- Was the overall approach adopted consistent with a systematic investigation or search, including formulating and testing the hypotheses by means of experiment or analysis?
- Was the overall approach undertaken for the purpose of achieving a scientific or a technological advancement?
- Was a record of the hypotheses tested and the results kept as the work progressed?
The Canada Revenue Agency (CRA) states that in its opinion, if each of these questions is answered with a “yes”, then an activity can be considered to have SR&ED under Canadian tax rules. It’s important to note that due to their interrelated nature, all five questions should be considered jointly when evaluating any given body of work.
Why Choose Us?
We understand how difficult it can be to navigate through this complex process involving narrative writing and financial calculations – that’s why our team of expert consultants is here to help! We keep in touch with our clients throughout the whole process so they can focus on running their business while we handle all the details for them. With our proven track record of helping clients maximize their tax credit claims, let us help you take advantage of this valuable program today!