Scientific Research and Experimental Development (SR&ED) tax incentives encourage businesses to pursue innovation in Canada. This program is available for eligible Canadian-controlled private organizations, other corporations, members of a partnership, individuals, and trusts. It may serve as an ideal source of non-dilutive funding for startups as well as the growth phase. You can consult experienced SR&ED advisors to determine whether your project qualifies for SR&ED tax credits and file for the same.
SR&ED Tax Credit Qualification
Your project needs to meet the following criteria to qualify for SR&ED tax credits.
Technical uncertainty
Your project must involve technical or scientific uncertainty that can be resolved through improving or developing new products, processes, materials, etc.
Technical advancement
Your project should aim to achieve technical advancement in your industry. The outcome of your R&D project should help improve or modify existing processes, technologies, or tools.
Systematic investigation
Often, a series of experiments are involved in SR&ED projects. You should maintain a detailed record of the experiments, iterations, failures, and successes of your project and submit them to support your tax credit claim.
Industries That Can Claim SR&ED Tax Credit
Industries eligible for SR&ED tax credit claim are diverse, such as agriculture, healthcare, manufacturing, engineering, etc. By understanding SR&ED tax credit eligibility criteria and maintaining records of R&D efforts, businesses can maximize their SR&ED returns. Often, many industries are involved in complex projects, which can make it challenging to determine its eligibility for SR&ED claims. In such instances, you can consult experienced SR&ED advisors in Calgary to determine whether your project qualifies for an SR&ED claim. The following are the industries that often qualify for SR&ED tax credits.
SR&ED Tax Credit for Manufacturing Industries
Manufacturing companies involved in developing new processes, products, etc., or improving existing ones are eligible for SR&ED tax credit. These companies may be involved in the following R&D activities to be qualified for this tax incentive program.
- Design or build prototype or custom machinery
- Design or develop state-of-the-art technology
- Improve products or technical processes
- Develop any patented products
- Resolve technical issues that otherwise couldn’t be solved through existing methodologies, practices, etc.
SR&ED Tax Credit for Informational Technology (IT) Industries
IT companies involved in creating new software or improving existing software functionalities are also eligible for SR&ED tax credits. These companies involved in the following R&D activities might qualify for SR&ED claim.
- Developed state-of-the-art software or hardware
- Projects involved in networking infrastructure, encryption, or computer languages
- Projects involved in applied mathematics, machine learning, AI, etc.
- Projects aim to overcome technical uncertainties related to computing technologies or devices
SR&ED Tax Credit for Biotechnology Industries
Biotechnology companies conducting clinical trials or developing new pharmaceutical products are qualified for SR&ED claims. Their following R&D activities can make them eligible for SR&ED tax credits.
- Develop new pharmaceutical products or medicine
- Contract Research Organizations (CROs) involved in pharmaceutical trials
- Involved in Phase I-IV clinical trials
- Projects aim to achieve advancement in the knowledge of science and medicine
SR&ED Tax Credit for Engineering Industries
Companies involved in innovations related to different engineering fields, such as mechanical, civil, electrical, chemical, computer, etc., are also eligible for SR&ED tax credits. Their following R&D activities might qualify them for the SR&ED tax incentive program.
- Innovations in various fields of engineering
- Developing customized solutions to resolve any issue
- Developing new methodologies or improving existing ones
- Developing or improving existing materials or techniques
- Designing and developing new equipment, technology, etc., in various engineering fields
SR&ED Tax Credit for Agriculture Industries
Companies involved in achieving advancements related to agricultural techniques, animal husbandry, etc., may also be eligible for SR&ED claims. If these companies are involved in the following R&D activities, they might be eligible for SR&ED tax credit.
- Developing methods to increase crop yields
- Improve growing conditions for plant species not native to Canada
- Improve harvesting efficiencies
- Work involved in horticulture, agronomy, fisheries, dairy science, forestry, animal husbandry, and other agricultural sciences
SR&ED Tax Credit for Healthcare Industries
Innovations concerning the healthcare industry can be complicated. As a result, medical professionals, clinics, organizations, etc., often struggle to determine whether their R&D project qualifies for SR&ED claim. In such conditions, consulting SR&ED experts in Canada might help you identify which projects would be eligible for SR&ED claims. The following business types might be eligible for the SR&ED tax incentive program.
- Independent contractor/physician or Medical Professional Corporation (MPC) performing R&D work for themselves
- Physicians or MPCs performing R&D works for third-party
- Biotech research firms, pharmaceutical companies, diagnostic clinics, life sciences firms, etc., performing R&D work for themselves or in collaboration with approved organizations, such as universities, colleges, research institutes, etc.
- Third-party organizations, such as pharmaceutical companies, biotech research firms, life sciences firms, diagnostic clinics, etc., perform R&D works for others, such as a university.
The above are a few examples of different industries and their possible R&D works that might be eligible for SR&ED claims. There can be other works beyond these examples that might be eligible for SR&ED tax credits.
Conclusion
Many companies often don’t realize that their work may qualify for the SR&ED tax incentive program. Additionally, many of them might be involved in complicated research procedures. Further, they may struggle with complicated regulations, and their claims might frequently be reviewed by the Canada Revenue Agency (CRA). Hence, these companies must work with knowledgeable and experienced SR&ED advisors in Alberta and seek guidance in determining their project’s eligibility and filing for SR&ED claims.
SR&ED Hub Advisors has been helping businesses across various industries in filing their SR&ED claims. Businesses need to maintain detailed records of their work, including details of their expenses, such as the ones involved in paying salaries or wages, sub-contractor feeds, acquiring materials or equipment, labour expenses, overhead costs, etc., to support their claim. We can help businesses involved in R&D projects maximize their SR&ED returns.
