By Fred Hausmann
Why would you care what a SR&ED claim is as a business owner? How about getting 68 cents back on every dollar spent as a cheque from the government! You got it – it’s one of the best ways to help fund your company’s growth.
One of the most lucrative funding programs for businesses offered by the Canadian government is the Scientific Research and Experimental Development (SR&ED) tax program. More than $4 billion dollars is ear marked each year for the program.
The name “Scientific Research and Experimental Development” does sound a little intimidating but it really comes down to solving problems that have a technological component to them. The government did not want to call the program “Research and Development” (R&D) as they felt R&D could also mean solving problems through the “bumble and stumble” methodology, which they did not want to pay for.
The idea here is that you need to follow a “scientific” approach to solving the problem and not just run around like a chicken with its head cut off as the means to solving the problem. Now that’s not so hard is it? The government isn’t expecting you to make your employees wear white lab coats and behave like academic researchers – you just need to show that you followed a logical process in trying to resolve the issue.
It boils down to attempting to overcome a technological uncertainty, where overcoming that technological uncertainty is not readily known. Wow, that was unclear but that’s part of the issue in claiming SR&ED! I can’t emphasize enough that there is a BIG GREY area as to what qualifies and what does not. The absolutely subjective things that the CRA looks at include:
- “what was readily known at the time?”
- “what exactly constitutes something being a technological uncertainty?”
Consequently, a lot of it comes down to “opinion” on the part of the CRA. What that means for you is you need to make sure you present the technological uncertainties and the technological limitations and barriers in the clearest possible manner. But that is a topic for different post. Watch tomorrow for what qualifies for SR&ED.
Fred Hausmann is the founder and senior managing director at the FRED Group Inc. a business development and specialty tax service whose mandate is to source, secure and support your business through the maze of government funding options. Specialties include SR&ED and other tax refund/credit programs. Visit FRED Group’s website or contact Fred at email fhausmann@FREDgroup.ca .