16 Sep SR&ED: Do you know about this research grant?
Author: Bilal Kathrada
What is SR&ED?
While most people haven’t heard of this government program, those who do know about it are likely taking advantage.
In a country with approximately 1.2 million small businesses, only an estimated 22,000 businesses are using the program. These 22,000 businesses are splitting the approximate $3 billion annual allowance.
So what exactly is SR&ED?
SR&ED stands for Scientific Research and Experimental Development. It’s the largest source of government funding available to Canadians. SR&ED is a subsidy program administered by the Canada Revenue Agency. It was created to encourage companies to do research and development.
One of the great features of the program is that this work does not have to be undertaken in a research lab, it can be undertaken in any place within the company’s facility. In fact, a company could be fabricating machinery, making wine, machining valves, developing software, designing new airplanes, etc. This program is meant to keep Canada competitive by providing an incentive for Canadian companies to continue to undertake research and development to maintain their competitive edge.
What does this mean to the company?
This means that companies could qualify for refundable tax credits of 33%-64% of eligible wages, materials, overhead, contract expenses or third-party payments. For example, if the company spent $100 in qualified wages on a research and development project, the company could get approximately $64 back from the government. Different transactions have varying rates of return. For example, if the company spent $100 in qualified contract payments on the project, the company could get approximately 33% back from the government.
Who can apply?
Most companies are eligible for SR&ED because they are working on creating something new, or improving an existing material, device, product, or process by generating information or knowledge to advance their technological knowledge base. Companies need to be advancing knowledge through basic research, applied research, or experimental development by way of systematic means. Whether the work is a success or a failure is irrelevant, because in both cases the company has advanced knowledge.
Most companies achieve advancement in knowledge through product enhancements and new product development. This advancement is often achieved through equipment design and modifications to decrease the manufacturing cost and time, and add new processes to ease their day-to-day tasks. For many of these companies, the SR&ED program has been a successful tool to help fund their innovations and stay one step ahead of their competition.
Businesses can apply for SR&ED no later than 18 months after the fiscal year end.
The bottom line is, if your company is innovating, you should be applying for SR&ED. Your competitors are taking advantage of it and so should you.
Need more information on how you can take advantage of this program? Drop us a line.