Frequently Asked Questions About SR&ED Eligibility

We use a bit of research in everything that we do. 

We browse and compare items when we do online shopping. We search for a product on Google and read reviews before buying it. 

Everything turns into a significant scientific statistic. It says a lot about how we live our lives and how we behave in a consumerist society.

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So, with technology this innovative and pervasive, what exactly does that imply? 

Well, one thing’s for sure, you need to keep pace with technology if you wish to understand the world. 

This is even more applicable for businesses that will need technological advancement if they wish to stay relevant and competitive. 

However, not all businesses can afford the latest, most advanced piece of technology, and nor would they have the capability of enacting research without a proper budget set aside for it. 

Thankfully, in Canada, there is such a thing as Scientific Research and Experimental Development or SR&ED. 

What is SR&ED 

SR&ED is Canada’s tax refund program with the purpose of advancing science and technology within the country by assisting businesses that are planning to or are associated with research and development. SR&ED tax refunds incentivize innovation for businesses, allowing them to pursue innovation and attain their goals. 

SR&ED is flexible in its scope and is not limited to only a few scientific sectors of Canada but to a wide range of industries that include: 

  • Software 
  • Manufacturing 
  • Medical health 
  • Agriculture, including agronomy and plant breeding 
  • Communication technology 
  • Food processing 
  • Veterinary science  
  • Fisheries  
  • Engineering  
  • And more

Looking at that list, you may think that the SR&ED main interest lies in laboratory and test tubes, but it assists shop-based products, from macro to micro businesses all over Canada. SR&ED plans to innovate a lot of assets produced in Canada and will provide for projects that include basic, applied, and experimental research. 

With non-dilutive grants and tax incentives, SR&ED gives businesses the opportunity to invest and focus on innovation while minimizing risk and offsetting the cost of these projects. 

To qualify for SR&ED tax refunds, applicants must ascertain a few things. Applicants must: 

  • Be able to gain information breakthrough that achieves the objective set by the contract; 
  • Have a project done in a systematic, scientific mode of research and investigation in order to collect reliable data properly; 
  • Be able to deal or have dealt with uncertainty due to the lack of scientific capability to deal with the objective; 
  • Be able to undertake a process of overcoming said objective and uncertainty. 

Once approved, applicants who gain this grant have cash refunds and investment tax credits to offset taxes payable. This includes: 

  • Wages and salaries 
  • R&D contracts 
  • Materials 
  • Payment and access to eligible research institutions. 

Being Canada’s most pervasive, well-supported, and ambitious funding program, it is easy to get overwhelmed by the opportunities presented by SR&ED. Not to mention all the tedious steps one has to undertake when applying for that grant, and it is very easy to get lost in the shuffle. So, we have compiled the most asked questions about SR&ED and provided the answers. 

10 Frequently Asked Questions For SR&ED Eligibility  

What is the waiting time to receive a refund after filing the SR&ED claim? 

This will depend on several factors, including the history of the taxpayer. However, it will take 3-5 weeks for a refund to be sent if the claim was processed within two weeks only.  

Is there an increased chance of being audited due to filing SR&ED tax refunds? 

No. As the authorities behind the SR&ED tax credit are separate from those that work at the CRA. As such, anything unrelated to your business will be discarded and not be considered in evaluating your claim. 

What is the deadline for corporations to submit an SR&ED tax refunds claim? How about for individuals? 

For corporations, they will have to wait 18 months after the end of the tax year, which they incurred expenditures that will be filed for the claim. For individuals, the waiting time will be 17.5 months. 

Is it possible to file a claim for both SR&ED and OIDMTC tax credits? 

It is possible to possess both, as long as the costs do not intertwine and are at the same amount. It is best to keep in check with the FAQ page for both programs, you shall see that it is not possible to claim labor costs if you have done it prior with the SR&ED credit. Moreover, it is recommended to process SR&ED first as it is faster and will give a bigger refund. 

Is it possible for a company that has not paid taxes and presented profits to be eligible for the SR&ED tax refunds? 

CRA guidelines state that a company can be eligible for a tax credit on the condition that it is a Canadian private corporation. If they are not, they may still receive a non-refundable tax credit for income taxes. 

If the project fails, does it still file for a tax refund? 

Definitely, a project that might fail at its objective can still qualify for a tax credit as long as the company has shown vigour and intent to create a breakthrough in innovation or technology. 

Can a company that has funding from IRAP still gain tax refunds from SR&ED? 

It is possible, but your prior funding will be deducted.  

Are we still eligible for SR&ED tax refunds if there are businesses that have similar products to our own? 

It depends on the terms of your project, and whether or not your project is developmental. If it so happens that you have a similar goal with a similar goal to another business, it might be set in place that you have different methods of approaching it.  

Can a company still get SR&ED tax credit even though most of the work was done by contractors? 

This is very situational, and you will have to consult with the CRA’s rules and regulations when it comes to filing a claim. They state that Canadian contractors must not be related to you or be controlled by you in any way 

How long does it take to receive a refund once my SR&ED claim has been filed? 

It will take around 4 months to a year to finalize your claim, and the duration of this process will decide whether your claim is fundable, non-refundable, or have adjustments made to it. 

Companies offering SR&ED Tax Refunds Consultation. 

If you want to apply for the SR&ED tax refunds but are not sure if you are going to be approved, you might want to consider getting the services of funding experts. 

Check out some of these SR&ED consultants: 

EVAMAX 

EVAMAX will have all the things you need when it comes to not only SR&ED consulting but have extensive information on a variety of different programs and opportunities. They know funding like it’s nobody’s business but theirs, and they will ensure that the terms of your grant are met and maximized.  

From finding a grant to claiming it, EVAMAX will supervise your documentation and cross out risks that may put your proposal in doubt. From Scale-AI to IRAP, EVAMAX’s flexibility is enough to tell you they know what they’re doing. Couple that with close to 20 years of operations with a 94% client retention rate, then it’s not so surprising they have been able to submit $450M in approved funding. 

Flow Ventures 

Flow Ventures is made up of a group of the most experienced SR&ED consultants in the world. It will do all the hard work involving the financial calculation and writing your proposal. 

They will guide you through the do’s and don’ts when it comes to maximizing SR&ED value throughout the years of our contract, estimating costs and expenses, and making sure that no wheel is left unturned. What’s best about Flow Ventures is that you can be sure to put trust into their hands as they are a company with decades of experience and a reliable repertoire, so they are a pick when it comes to SR&ED consulting.  

Management Support Network 

We have established that applying for a grant will probably cost you an arm and a leg, probably even more when you have to do all of that alone. With Management Support Network, not only will you have top-quality support to boost productivity, but you will be given a team of professional accountants, consultants, and a worthy group of people.  

To make the most out of your claim and track all the moves of your proposal, a reliable group will coordinate with each other tirelessly with you to ensure that you meet all of the requirements and remove risks to increase value. From being with you at the beginning up until you file your tax return, MSN will be there every step of the long, long way.  

Conclusion 

As we gear towards a world dominated by science and the pursuit of knowledge, businesses may have no choice but to adapt to this change. 

It can no longer be ignored the correlation of science to everything else, and SR&ED’s encouragement of businesses to partake in this collective pursuit is a noble pursuit by the Canadian government. 

If you do not want to get left behind in the bygones, looking towards SR&ED is the step to keep yourself ahead and at pace. 

 

 

About Joel Levy 2310 Articles
Editor-In-Chief at Toronto Guardian. Photographer and Writer for Toronto Guardian and Joel Levy Photography