Scientific Research & Experimental Development (SR&ED)

June 05, 2017

LandingBanner_679x220_Microscope_ThinkstockPhotos-485884385.jpg

When you are trying to develop or improve your business’s products or processes, the Canadian Scientific Research & Experimental Development (SR&ED) program is considered the mainstay for innovation and support in Canada. 

The SR&ED program’s tax incentives may apply to activities in which you are already taking part. 

SR&ED activities go beyond those taking place in a traditional research lab. Many companies are not typically perceived as being in the “science and technology” business, but are taking the financial risks that go along with eligible work. Significant project funding incentives are often missed because it is not easy to recognize who is entitled to the claim, particularly when development risks are shared throughout the supply chain. This funding program accepts applications throughout the year. 

Your company could qualify for SR&ED funding if you’re: 

  • Developing a new product, device, material, or process
  • Improving an existing product or process
  • Working to advance the capabilities of the next generation of your technology
  • Collaborating or partnering with other associations and researchers

For Canadian-controlled private corporations, there is an enhanced federal investment tax credit that is refundable even when corporations are in a loss position. There is no maximum claim amount, and the program features varying rates of returns:

  • Up to 74.4% of eligible salary expenses can be recovered
  • Up to 48% of material costs either consumed or transformed, even temporarily, can be recovered
  • Up to 41% of the eligible contract payments paid to eligible arm’s length contractors
  • Overhead expense can be claimed directly or 55% of salary can be claimed in lieu 

Large corporations

The Canadian government reserves some “refund ability” when in a loss position to smaller corporations - we can help you ensure credits are utilized.  Ask our team how we can help you optimize in this scenario. For many corporations, this involves understanding the corporation or corporate group’s goals.

For regular R&D operations, processes can be introduced to ensure SR&ED accruals are fact based and recognition is attributed to those driving the bottom line.

Small corporations

Compensation planning for early stage owner/operators is a critical component of SR&ED in emerging and scaling companies. Maximize your return and appropriately identify small changes to your process that lower compliance costs so you can focus on your business.

How can BDO help?

We offer many specialized services beyond year-end audits of financial statements, including assistance with SR&ED claims. Our team is comprised of industry experts including tax and financial specialists, engineers, scientists, developers, and programmers who can assist with the technical and financial requirements of a SR&ED claim and ensure you receive the benefits to which you are entitled.

We mentor our clients to ensure they meet program eligibility requirements, adhere to internal processes and controls for supporting documentation, file the necessary forms and reports, and ultimately improve their overall claim methodology.  Successful companies then have the ability to allocate further funding to research and development activities on an ongoing basis. We collaborate with your funding partners to help manage the larger business funding process.

Why BDO?

Industry Experts – Our SR&ED professionals have years of actual industry experience. They know your industry and understand your technology challenges, given industry specific constraints. 

Global Reach –. With offices in 153 countries, our global network can help with your international R&D requirements.

Integration - We integrate with your accounting and tax partners to ensure all advice reflects the needs of your entire organization. 

For more information, contact your local BDO office.