SR&ED Credits and Eligibility
If you are trying to resolve a technological uncertainty by application of systematic experimentation and investigation, you may well have SRED expenses eligible for a hefty tax rebate. It matters not that you resolve the uncertainty, nor does it matter whether your procedures yield revenue. The point is that you advance your technological knowledge. Even if your SRED effort is a flop it has advanced your knowledge because you now know that approach doesn’t work and you have reduced the uncertainty. And it is YOUR uncertainty that is at issue here. The benchmark is your knowledge, not the industry’s or the nation’s knowledge. Your competitor may have resolved the issue long ago, but so long as their solution is not public domain, your efforts at resolving it for you is probably SRED.
The SRED credit can be claimed on the basis of labour and general costs (35% for small business corporations for the Federal SRED credit plus applicable Provincial SRED credit), or you can use the ‘proxy method’ which in many cases will greatly increase the SRED claim.
You can claim up to 18 months after the company’s year-end.
When you have engaged us to prepare your claim, we first want to identify all work and innovation-related projects that are eligible for the SRED credit.
Here are some questions to assist you in determining if you may have a potential SRED claim, bearing in mind that CRA is looking for projects in which the work was non-routine or which had an uncertain outcome.
SIGNS OF TECHNICAL UNCERTAINTIES INCLUDE:
- Tasks that took longer than expected
- Tasks through which repetition of a sequence of operations yielded results successively closer to the desired result
- Challenges that induced you to investigate (by experimentation) many plausible solutions
Did you experience any technical uncertainties over the period such as:
- Tasks that took longer than expected
- Task repetition which yielded stronger results
- Experimentation resulted in multiple solutions
Over the period(s) under consideration, did you:
- Build a new product or develop a new process, or improve an existing one?
- Build any prototypes or release multiple versions of an asset?
- Try to increase products’ reliability, availability or scalability?
- Try to resolve any issues with new frameworks?
- Work with new libraries or combinations of design patterns?
- File, or intend to file any patents?
- Explore using a product or a process in a new way?
Regardless of the outcome of your SRED eligible project, your effort and costs associated with advancing your own knowledge outside of what is publicly available can be claimed for a significant investment tax credit.
