Archive for July, 2008

From the Ask an Expert Mailbag! The question, are SR&ED Tax Credits worth the effort you put into them? Here we try to answer that all important question.

Preparing a sred claim can be a time consuming process requiring the gathering and refinement of large quantities of information in order to produce a high quality claim. The time required to produce a quality claim often leads companies to believe that the effort required is greater then the possible reward offered by a sred refund. Many companies believe that the time invested in producing a sound claim will not be justified by the claim amount. However, by increasing sred information gathering efforts as well as overall sred activities companies will often end up saving thousands with sred.

Many companies that do not claim sred do so because they believe that they have not done any work that qualifies under the program or have only done a small amount of work which would not justify the time spent to make a claim. While this is possible it is more likely that they have missed possible projects that if claimed would give them the potential of saving thousands with sred. By increasing their brainstorming and project evaluation efforts and digging deeper into their operations it is likely that many companies will find further projects suitable for a sred claim. This increased effort to find qualifying projects will allow the company to increase the amount of their claim and thus increase their possible return.

In order to gain the maximum possible return from a sred claim it must be able to be well defended against an audit. In order to ensure a claim can be well defended quality “evidence” information must be gathered. This can be a time consuming process however the increased time and effort is put into information gathering will increase the amount and quality of the claim information. High quality claim information will help to ensure that if the claim is audited the amount of deductions to the claim is low and the maximum return is achieved.

One of the most effective ways to increase claim efficiency and allow a greater value claim to be made is to institute a system of tracking sred activities throughout the year. By keeping records of sred activities as they occur companies can eliminate much of the time consuming information gathering that would otherwise need to be done at the end of the year to prepare the claim. While this method requires moderate effort throughout the year it will significantly increase the efficiency at which the claim can be produced and allow for an overall increase in claim quality.

In addition to increasing sred information gathering efforts it is also advantageous to increase overall sred activities. Increased investment in activities that produce scientific and technological advancements not only will increase the amount of a yearly sred claim but will also allow for the development of new competitive advantages for the participating company.

As we can see increased efforts while often time consuming can allow for great gains in sred claim amounts leading to many companies saving thousands with sred.

B&W Canada gets contract for 8 replacement steam generators for Bruce Nuclear Power Plant.

Goodyear to open Retread Plant. Trend in construction, mining, forestry 7 recycling industries have prompted Goodyear Canada Inc to open a plant in North Bay, On to be completed in fall of 2008.

Onex gets Husky! Onex to pay $960 million for husky injection Molding Systems Ltd.

Patheon Inc to sell Burlington based commercial manufacturing business to Pharmetics of Laval, QC a vitamin & herbal products contract manufacturer.

Mergers and Aquisitions reach 2000 transactions, for the first time resulting in a deals reaching a total of $268.6 billion. The largest deal was an acquisition of Alcan by Rio Tinto for $37.6 billion.

Siemens VDO Plant to close! Due to decrease orders for its product on falling North American car sales and rising cost for materials like copper and plastic.

Changes to the SR&ED Tax Credit Program  to encourage more Canadian Companies to claim!

This week we are looking at our “Ask an Expert” Mail bag! We have been noticing questions like this one. So here is our response!

Gas prices are up and I can’t justify spending more money on developing a new product. Can I still take advantage of the SR&ED program?

You do not have to develop a new product to be eligible for the SRED program. In fact, the program requirements stipulate nothing about having to develop a new product. As per the Canadian Tax Act, work is eligible for SRED according to whether or not technical (scientific) criteria can be met:

1. Technological uncertainty
2. Technological advancement, and
3. Technological experimentation

Often, if you develop a new product, the aforementioned three criteria can be met. However, it is quite possible for the criteria to be met if an existing product or process is IMPROVED.

For example, let’s assume that you have successfully filed for SRED for the development of a new automotive headlight. If you could improve upon this headlight in some manner, then it may be possible for you to claim SRED. There are two ways you can do so.

1. SRED eligible product improvement

What if you were to improve the product by manufacturing it out of a different material? If scientific uncertainty exists on how to incorporate this material into the headlight, and you significantly advance a field of science, then your project may be SRED eligible.

2. SRED process improvement

Process engineering is considered a science, and thus, an advancement in the field of process engineering could be considered a SRED-eligible project. Forays into the automation of manufacturing processes, and in experimental lean manufacturing methods could potentially qualify, if technological uncertainty can be proven to exist.

Even if you have not developed any new products, it is quite possible that you have SRED-eligible activity. Therefore, when in doubt, it’s best to contact a SRED consultant.  A qualified engineer will be able to look at your previous expenditures and determine what can be filed under the SRED program.