How It Works
The key question to any successful claim is the technological/scientific uncertainty that the
potential project must overcome.
The SR&ED Canada Tax Credit Program acts like a government grant for Canadian controlled
private corporations (CCPCs) that meet certain criteria.
In some circumstances, the Federal Government provides a refundable 35% tax credit.
If your Company doesn't owe any tax in a given year, the SR&ED Tax Credit can be refunded
as cash.
The provinces can also provide R&D incentives. For example, the Ontario government makes
available a 10% refundable tax credit.
There are two components of an SR&ED Tax Credit claim: the first component is identifying an
SR&ED project and writing up a technical narrative; the second component is to identify the
eligible expenditures that qualify as SR&ED which can then qualify for a tax credit.
Many complex provisions exist under the Income Tax Act as well as numerous precedent-setting
court cases, along with administrative positions set out by CRA. Horne & Associates help clients
cut through this complex maze of rules so that successful claims can be made quickly and efficiently.
What work qualifies?
If your company has been, or will be, doing leading edge development and/or experiencing
significant technical problems, then you will likely qualify for the Research and Development
Tax Credit
- Only the company that owns the intellectual property can apply;
- The work was performed in Canada by Canadians;
- Your work generated new knowledge to solve a problem/problems that were perhaps
impossible using existing knowledge. - The project can fail (attempts to solve the problem/problems prove to be non-financially
viable) and still be eligible for SR&ED
Easy examples of a scientific uncertainy:
One of the easiest examples can be illustrated in the manufacturing industry:
There is one dimension on a product that you are attempting to make that proves to be
difficult and it may require custom work to overcome its potential difficulty. The custom
work/tooling/etc…can qualify as SR&ED.
A metal stamper attempting to venture into CNC machining for the first time has uncertainty
and will require experimentation and therefore, could apply for SR&ED tax credits.