Wineries and Scientific Research & Experimental Development
Don Simpson
BDO Dunwoody LLP
September 2002, Growing Businesses
BDO Dunwoody has recently submitted a claim for over $14,000 in investment tax credits under the Scientific Research and Experimental Development ("SR&ED") program for one of our local BC wineries. Based on discussions with Canada Customs and Revenue Agency, that claim will be accepted in full. This means a tax savings of $14,000 to our client for work that they had already performed. Perhaps you too are eligible.
Let us describe how this process worked . . .
We held an introductory meeting with the owner, chief wine steward and our SR&ED expert, to explore the activities that the winery engages in during their wine making process. We shared ideas and identified that there were three areas of their operations which we felt were within the definitions of eligible SR&ED activity. We then asked the company's accountant if they could quantify the activities that we had discussed. They were able to do so with very little difficulty.
Upon analysis of the information we received, we realized that there was a sizeable benefit to be pursued. Our SR&ED expert and our client then hammered out the scientific merits of the advancements that had seen identified. We created a working document that gleaned from our client the uncertainties and experimentation inherent in advancing the science of wine making. The process was insightful and gave both us and our client a whole new outlook on their operations.
The next step was to refine the notes of our discussions to form the technical component of our submission to the science advisors of CCRA. Having received the approval of our client, we then filed SR&ED claims for the current and preceding tax years. Upon receipt of the SR&ED claims, CCRA arranged to meet with our client at their premises to assess the validity of the supporting documentation and merits of the claims. We attended this meeting both to assist our client in building a good relationship with the tax department, and to learn how CCRA would be reviewing the scientific and technical advances within the wine industry. This proved to be a great experience.
Once satisfied with their audit investigation, the tax department's officers then took the time to provide tips and techniques to improve the quality of our client's SR&ED documentation for future SR&ED submissions. In this regard, our client is now adequately prepared to critically evaluate their business on an annual basis and to file investment tax credit claims where they feel that they have advanced the science of wine making.
We believe many of the businesses in the wine making industry can also benefit from SR&ED tax credits. You need only to: find the appropriate label to place on scientific and technological advancements within your business; remove the enclosure that had previously retained your efforts; and pour a generous serving of your industry knowledge to CCRA for evaluation. You may be pleasantly surprised by the results.
Don Simpson is a SR&ED technical specialist with the BC Interior Region of BDO Dunwoody LLP in Salmon Arm. You can reach him at (250) 832-7171 or by email at dsimpson@bdo.ca.
This material is general in nature and should not be relied upon to replace the requirement for specific professional advice.
