SR & ED - The Scientific Research and Experimental Development Program
The SR&ED program is a federal tax incentive program that encourages Canadian businesses of all sizes, to conduct research and development (R&D) in Canada. It is the largest single source of federal government support for industrial R&D.
The SR&ED program gives claimants cash refunds and/or tax credits for their expenditures on eligible R&D work done in Canada.
Canadian corporations, proprietorships, partnerships, and trusts can earn an investment tax credit (ITC) of 20% on qualified expenditures . There are also provincial programs which offer a 10% refundable tax credit .
What kind of projects qualify?
To qualify for the SR&ED program, the work must advance the understanding or increase the scientific knowledge within your own company. You must identify a scientific or technological uncertainty, and set up a systematic investigation process.
This does not mean the project must be totally new or revolutionary to the industry. It just has to be new to your company.
Work that qualifies for SR&ED tax credits:
- experimental development to achieve technological advancement to create new materials, devices, products, or processes, or improve existing ones
- applied research to advance scientific knowledge with a specific practical application in view;
- basic research to advance scientific knowledge without a specific practical application in view;
- support work in engineering, design, operations research, mathematical analysis, data collection or testing, which directly supports the eligible experimental, applied or basic research.
Any project that could possibly change or alter the process efficiency, finished product performance, shelf life, nutrient value or sensory attributes is an opportunity for a tax credit.
This can be as simple as:
- Changing an SOP, trying a new processing technique
- Trying new equipment or a new configuration of equipment or processing line
- Substitution of an ingredient to see what happens to sensory attributes
- Addition of a new ingredient to improve sensory, microbiological or nutrient values
Activities not eligible for benefits:
- style changes, fine tuning, trouble shooting
- market research or sales promotion
- quality control or routine testing of materials, devices, products, or processes
- routine data collection
- development based solely on design or routine engineering practice
Eligible Expenses:
Time of all personnel involved in:
- project research and set up
- project test runs
- test data collection and analysis
Test materials:
- ingredients,
- materials (meat, food) used in test runs
Tools for Success:
Even if you doubt whether a project qualifies for SR&ED, check it out – it probably does!
Admitting that the answer to an unknown is not readily accessible is critical for qualification for SR&ED
For more information, visit the links provided below:
Federal Program
http://www.cra-arc.gc.ca/txcrdt/sred-rsde/menu-eng.html
Provincial Incentive Program
http://www.cra-arc.gc.ca/txcrdt/sred-rsde/prv-eng.html
Ontario Innovation Tax Incentive (10% refundable)
http://www.rev.gov.on.ca/english/credit/oitc/index.html
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