In the world of Scientific Research and Experimental Development (SR&ED) in Canada, understanding the difference between Qualified and Allowable Expenditures is key to maximizing your tax incentives. Let’s break it down for you:
Qualified Expenditures
Qualified Expenditures encompass costs directly tied to eligible SR&ED activities, such as:
- Salaries and Wages: Payments made to employees actively engaged in R&D.
- Materials: Costs for substances, equipment, or materials directly used in research.
- Contract Expenditures: Payments to third parties for SR&ED services.
- Overhead: Indirect costs related to the project, like utilities and maintenance.
Allowable Expenditures
Allowable Expenditures are a subset of Qualified Expenditures eligible for claims:
- Wages and Salaries: A portion of salaries for employees involved in both SR&ED and non-SR&ED tasks.
- Materials: Only materials used in the SR&ED process can be claimed.
- Overhead: Typically, 55% of overhead costs are claimable.
- To maximize your SR&ED claim, meticulous documentation is essential. Partner with SRED Consultants for expert guidance, ensuring compliance with Canada Revenue Agency (CRA) guidelines.
