Are you advancing Science or Technology in the field in which your business operates?
By Don Simpson, Partner
BDO Dunwoody
If so, then you might be eligible to receive some of the generous tax credits that are available from your Provincial and Federal Government.
The tax credits available to companies and individuals in Canada who are advancing science or technology are among some of the most generous available in the world. Yet only a small number of businesses performing eligible Scientific Research and Experimental Development (“SR&ED”) actually apply for the credits. As Canada poises itself to be recognized as a world leader in SR&ED we can only expect that the accessibility to these credits will improve.
What are the credits? For SR&ED that is being performed in Canada by a business resident in British Columbia, there are two tax credits available. A British Columbia tax credit of 10% of your eligible expenditures and Federal tax credit that may be as much as 35% of your eligible expenditures. These credits may be applied to reduce your respective Provincial and Federal tax liabilities. In some circumstances where the credits exceed the taxes payable, the credits will be refunded to you in cash.
What is eligible SR&ED? If you were to read the definition it would appear complex however, the objective is quite simple. If you know that you will be successful in your pursuit, then you are involved in routine engineering which is not eligible SR&ED. Where you identify an opportunity for scientific or technological advancement, but do not know how it will be achieved, list out your alternatives to address the advancement, approach them one by one in a systematic manner, and document your observations and conclusions, you are now likely performing SR&ED.
The funding that is available to eligible SR&ED performers is not limited to an amount provided in a government budget. Rather it is only limited by the number of companies and individuals that are eligible, and apply for it. As mentioned earlier, there are many eligible SR&ED performers who currently are not applying. We must ask here, why not apply? If you are performing eligible SR&ED activities you only need demonstrate it to the government by filling a couple of additional forms along with your annual tax return. If they concur that your activities are eligible, they will give you the credit, tax credits that is, which you deserve.
If you are not sure if your activities may be eligible, why not give us a call? Don Simpson of our Salmon Arm office has established a good rapport with the Canada Customs and Revenue Agency (“CCRA”) Penticton District office, which handles the SR&ED applications for our area. Through or contacts we can obtain for you a quick opinion as to whether or not your activities may qualify and handle all of your paperwork that is involved. We have assisted companies in the fields of bio-technology, computer software, manufacturing and engineering services to list a few, and may also be able to assist you.
We ran a success story in the Spring 2003 issue of Canadian Grapes to Wine. If you would like to obtain a copy of this article please contact Don Simpson at BDO in Cranbrook. He can be reached at (250)426-4285 or email him at dsimpson@bdo.ca.
This material is general in nature and should not be relied upon to replace the requirement for specific professional advice.
