Get financial help for your development projects

The Scientific Research and Experimental Development (SR&ED) tax incentive program is administered by the Canada Revenue Agency (CRA) to reward companies for solving technological challenges and improving the economy through R&D.

Tax incentive programs such as SR&ED are governed by the Income Tax Act. SR&ED prosecution is defined as a systematic investigation or search carried out in a field of science or technology by means of experiment or analysis for the advancement of scientific knowledge or for the purpose of achieving technological advancement for the purpose of creating new, or improving existing, materials, devices, products, or processes, including incremental improvements.

In contrast to other government support programs, SR&ED does not have a cap on how much it will reimburse you: If your project meets the program's eligibility requirements, you will receive the full financial benefit in the form of an investment tax credit (ITC) and/or a cash refund.

SR&ED is a great program for companies that are facing technological challenges. You may, however, be wondering how your company can make use of the program. That starts by defining your project.

Why Was the Project Done?

Your business venture may require you to undertake a development project, and these development activities are what you should look at when considering SR&ED. It must be deemed that you could not resolve a scientific or technological uncertainty by applying your existing knowledge or applying publicly available solutions to your situation for your development project to be considered for an SR&ED tax incentive.

Moreover, to be eligible, a project must meet the following two requirements:

1. A knowledge gap exists between your project starting point and your project objective.
2. You are unable to bridge this gap using your current knowledge or what’s available in the public domain.

In summary, SR&ED's goal is to advance our understanding of science or technology and to close this gap by acquiring new knowledge so that we can create new science and improve existing technology. In your application you must describe how the known methods could not overcome the limitations in the underlying scientific or technological understanding. This SR&ED requirement must be met for a project to be considered.

How Was the Project Done?

Once you’ve clarified that the tools in your existing toolbox are not capable of achieving the desired project objectives, the next step is to determine how to solve the problem. It’s very important that the process you took in trying to overcome your uncertainty was methodical in nature and followed the scientific method.

It may not always be clear whether a project aligns with the scientific method within a business context, but it is essential that the process you adopted to address your uncertainty is following a methodical approach.

You need to follow a logical sequence of steps designed to overcome your scientific or technological uncertainty to produce new knowledge and to make a scientific or technological advancement. Describe what scientific method you used to solve your problem. Another requirement for SR&ED will be met if this is accomplished.

How to Apply

If you’ve used a methodical and logical approach to accomplish your development project, you can apply for SR&ED tax credits using the forms provided by the CRA. It is, however, always a good idea to get qualified help when applying for credits.

This article was supplied by Mentor Works, 28 Bett Court, Unit B, Guelph, Ont. N1C 1B9, 888-599-3111, www.mentorworks.ca.