The Scientific Research and Experimental Development program or SR&ED or SHRED as referred to by some, is a Canadian government program that is administered by the Canada Revenue Agency (CRA) used to encourage companies from a cross section of industries to be innovative. The theory behind the incentive program is that by helping companies offset the cost of doing R&D through cash refunds and or tax credits, organizations will be encouraged to engage in developing new technologies through scientific methods. By so doing they will make Canadian based companies more efficient and globally competitive. Other OECD countries have similar programs in place.
The Canadian model is one of the most generous program among the OECD countries. Most organizations would be wise to access and benefit from what the program has to offer. The federal government will refund up 35 cents on a dollar for eligible expenses for Canadian Controlled Private Corporations (CCPC) and 15 cents for Non CCPC’s. The 35% for CCPC’s is fully refundable, as cash whereas the 15% is a tax credit. In addition different provinces provide a refund that varies from province to province.
Investment Tax Credits (ITC)
Companies benefit from the program in several ways. The obvious benefit is the ITC that is fully refundable for CCPC. The refund can be ploughed back into the companies R&D program to help cut down the cost of product development. As an example, where a company would have had to incur $100, 000 for R&D, this can be reduced to as much as $65,000 based on the expenses incurred. This figure takes into consideration the overhead, which in most cases in calculated as percentage of the salary (55% of the salary) and the provincial portion of the tax credits.
In addition to the tax credits, qualifying expenditures can be used to reduce taxable income. SR&ED expenditures can be accumulated separately or pooled for tax purposes. The pool of expenditures can be written off immediately, or deferred indefinitely for tax purposes. For companies that don’t have high enough taxable income, they can defer the deduction to future years when needed.
The above illustrates why it is important for organizations carrying out scientific research and or product development need to ensure they submit a claim in order to take full advantage of the program’s benefits.
How does Agnelum help?
- With our strong scientific and business background,we have the expertise to put the information together in a form that clearly shows the technological or scientific advancement associated with your work. We have experience accumulated over a number of years including working as Reviewers with CRA reviewing SR&ED projects. We have a clear understanding of the requirements and the process.
- Agnelum will work with you to ensure all the necessary information is captured and presented to the CRA in an acceptable form. Will work with you to ensure nothing is overlooked.
- We will work with you to streamline the process of capturing SR&ED activities and related expenditures.
- We will work with your staff to organize your record keeping for future claims.
- We will Represent you with the CRA including answering any questions to clarify any issues that may arise.