What Is SR&ED?
The Scientific Research & Experimental Development (SR&ED) program is a Canada Revenue Agency (CRA) initiative that supports science and technology through tax incentives for R&D conducted in Canada. Provincial governments generally participate with coordinated tax assistance as well.
Who Can Apply?
All Canadian taxpayers who file a T1 or T2 tax return and develop new products, or enhance/modify/improve existing products or technological processes can apply. Kelid™ has successfully assisted clients in industries including manufacturing, recycling, software & IT, biotechnology, food & beverage, tool & die, oil & gas, mining, machining and fabrication.
What Expenditures Are Eligible?
All project-related expenditures can be submitted. These typically include: salaries and wages, materials destroyed or used to build prototypes, work subcontracted to other Canadian taxpayers, and capital equipment (not allowed from 2014).
How Much Can We Recover?
Canadian taxpayers can recover up to 70% of their expenditures, depending on their location (within Canada), ownership (Canadian vs. Foreign, Private vs. Public), taxable income (in the prior fiscal year), and size (amount of capital employed).
Are There Provincial R&D Tax Incentives?
Yes. Most Canadian provinces and territories offer complementary R&D tax incentives. The specific percentages of expenditures that can be recovered and refundability criteria vary from province to province. Our comprehensive services include application for both the Federal and Provincial tax credits.
What Is The Maximum We Can Claim?
The SR&ED submission is not capped and therefore there is no predefined maximum amount that a company can claim. All expenditures can be submitted as long as the work meets the three SR&ED program criteria of technological obstacles, systematic investigation and technological advancement.
How Much Will It Cost Us?
Kelid offers a convenient contingency fee structure. There will be no fee unless your claim is approved by the CRA and you receive your refund. Our business structure allows us to offer extremely competitive contingency rates, please contact us to find out more. To be selected as one our preferred client with 12.5% contingency rate please visit Kelid’s fee page. Hourly fees can be arranged upon mutual agreement. Check out our competitive Contingency Fee Estimator
What Is The SR&ED Filing Deadline?
The CRA filing deadline for the SR&ED submission is 18 months after the last day of your fiscal year. At Kelid™, our initial filing can typically cover the previous two fiscal years. We prefer to submit applications for our clients well in advance of the filing deadline or simultaneously with your tax return.
How Long Will It Take To Process Our Claim?
Revenue Canada commits to processing refundable claims which are filed jointly with the year-end T2 within 120 days. Non-refundable claims are processed within 360 days. Amended refundable and non-refundable claims are processed within 240 and 360 days respectively. In our experience, most claims are approved within 2 to 6 months.
How Do We Know if We Qualify?
Most companies think of R&D as occurring in dedicated research facilities or a lab setting. However, this is not the case in the SR&ED program. Our experience shows that there are very few scenarios in manufacturing, IT, biotechnology and other industries where SR&ED does not take place. Check out Kelid’s interactive Self-assessment Look Up
How About if We Do Not Do Any R&D?
Many of our current clients did not initially consider any of their shop floor work to be R&D. This is a common misconception. Through the SR&ED program common, everyday activities on the shop floor or in an industrial setting are eligible – as defined by the CRA guidelines. Additionally, work does not have to represent a breakthrough or greatly scientific in your industry.
Small incremental improvements and advancement in the design or formulation, materials, quality, durability, or energy efficiency of your product or process are sufficient.
How About if We Did Not Have Any Taxable Income?
Your company does not have to be profitable to apply for an R&D refund. SRED can be a refundable tax credit even if you did not pay taxes. In addition, any unused tax credits can be carried backwards 3 years or forward 20 years. ITC and OITC credits are cash refunds and ORDTC credit is a non-refundable tax credit.
How About if Our Project Was Unsuccessful?
The commercial or technological success of your product and/or process is not a determinant in assessing the viability of your claim. Failed, abandoned or postponed projects still qualify for the SR&ED tax credit. Failures are one of the common signs of eligibility of your projects for SR&ED. The technological advancement in unsuccessful projects lies in ‘lessons learned’ and in-house expertise accumulated in the course of your systematic investigation.
What Will Be Happen if We Subcontract Most of Our R&D?
Work subcontracted to other entities on your behalf may be eligible for the SR&ED tax credit, subject to certain limitations. Subcontractors should be Canadian tax payers and involved individuals should physically reside in Canada. You must also retain the intellectual property or rights to the work performed, and they should be at arms’ length.
Will Our Entire Business Be Audited If We Apply For SR&ED?
No. Historically, government auditors enhanced their careers by the volume of dollars recovered from taxpayers. Reviews could be arranged through a site visit or via submission of requested supporting documents. It could be technical, financial or both. The SR&ED reviews are separate from the CRA audits. For example, Revenue Canada clearly indicates in its publications that the SR&ED reviews do not extend into full business audits.
Can Kelid™ Ensure Confidentiality Of Our Claim?
Many of our clients are engaged in the development of proprietary technologies. Kelid™ offers confidentiality agreements in writing to our clients before the commencement of each engagement. We guarantee that all information conveyed to us in the course of SR&ED claim preparation will be kept in the strictest of confidence.