The most valuable elements in business today are people and knowledge, particularly people with knowledge. Developing new knowledge and converting it into practical reality is a difficult process. Fortunately, organizations can benefit from the Canadian Scientific Research & Experimental Development (SR&ED) program that rewards businesses with some of the most generous, broad-based tax incentives in the world. However, with federal and regional changes to legislation, technical amendments, and developing administrative policies and court cases that affect the SR&ED program, staying up-to-date with the program is needed to increase the chance of success.
Whether developing or enhancing a new product, working to lower the environmental effect of a manufacturing process, or working on the next era of technology, SR&ED helps clients access a considerable amount of tax credits or refunds. Under Canadian tax law, advantages for qualifying SR&ED costs include eligibility for investment tax credits (ITCs), total tax deductions in the year expenditures occurred, and the ability to ‘pool’ SR&ED expenses.
How are You Carrying Out the SR&ED?
The initial part of the definition defines how SR&ED is performed – it must be a “systematic analysis or search carried out in a field of science or technology using analysis or experiment.”
Your work may be considered SR&ED if:
- You have to try to overcome one or more technological or scientific problems.
- You have to conduct experiments, trials, or analyses to solve these problems. In other words, it is not likely to solve the problem or achieve the goal based on your current knowledge – you need to experiment.
- The experiment must carry the form of a systematic investigation. This means that you begin with a problem you cannot solve, create a theory, design an experiment about that hypothesis, test rigorously, and develop rational conclusions based on the results. It’s an iterative approach with documentation.
Opportunities to Fund Your R&D
However, many are unaware that their development activities could be permissible to these tax credits and pass the opportunity to fund their research better. Activities such as growing plant growth density, testing various lighting conditions and atmospheric conditions, or preventing the production of specific cannabinoids such as THC or CBD have a high chance of being permitted to SR&ED credits.