Government Funding

for Private Sector R&D:

the SR&ED Program

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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

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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.

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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

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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?

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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.

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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?

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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.

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For more information, visit http://www.ccra-adrc.gc.ca/sred

Ottawa Tax Services Office

333 Laurier Ave West

(613) 598 4233

Kay James

National Technology Sector Specialist, Software/IT

Canada Customs and Revenue Agency

kay.james@ccra-adrc.gc.ca