Government Funding for Private Sector R&D: the SR&ED Program

_____________________________________________________________________________________ SR&ED October 5th The SR&ED Program - tax credits for Scientific Research and Experimental Development Objective of the Program: to promote experimental R&D in Canada the major source of government funding for private sector R&D - over $1.5B annually more than 11,000 companies benefit 80% of program users are SMEs

_____________________________________________________________________________________ SR&ED October 5th SR&ED - Investment Tax Credit For small CCPCs - ( Canadian Controlled Private Corporations with expenditures less than $2M, and previous- year taxable income below $200K ) - the rate is 35% of current expenditures, plus overhead - either itemized expenses or an amount in lieu (65% of salaries) the tax credit is ‘refundable’ Larger Canadian corporations receive a 20% credit against taxes. Some provincial and territorial governments also have incentive programs.

_____________________________________________________________________________________ SR&ED October 5th Benefits to Program Users: this is entitlement funding - no competition with other claimants there is no cap on the $s available successful outcome of the work is not a criterion commercial viability is not a criterion this funding is not repayable there are no strings attached

_____________________________________________________________________________________ SR&ED October 5th FAQs how can SR&ED be differentiated from normal development work? what should be included in a claim for SR&ED ? what documentation is necessary - and how much is enough? how can SR&ED be claimed with minimum extra effort?

_____________________________________________________________________________________ SR&ED October 5th SR&ED could be - attempted advance in scientific knowledge, or work aimed at advancing technology, in order to create or improve materials, devices, products or processes. Work (in certain categories) that is necessary support work for an attempted advance can also be claimed.

_____________________________________________________________________________________ SR&ED October 5th Scientific/Technological Advancement means progress beyond existing technology (or scientific knowledge) towards a well-defined scientific or technological objective. When looking at some work - was there a technological reason why this could not be done before? could the result not have been achieved using existing technologies? are there results applicable beyond the present system? would peers recognise this as an advance?

_____________________________________________________________________________________ SR&ED October 5th Key Tasks First: determine whether there was an advance (or attempt at advance) in science or technology. If so, then it’s likely there was SR&ED. Then: identify the effort that went into the (attempted) advance, and the associated expenditure, and identify records or other material useful to substantiate the claim.

_____________________________________________________________________________________ SR&ED October 5th For more information, visit Ottawa Tax Services Office 333 Laurier Ave West (613) Kay James National Technology Sector Specialist, Software/IT Canada Customs and Revenue Agency