In a recent article, Ross Cooper of Excellence in Manufacturing Consortium (EMC) discussed how the slow days of summer are ripe for SR&ED activities as companies are slowing or shutting down production and attending to pesky ongoing production, machinery and process issues as well as integrating improvements to increase efficiency for the rest of the year.
Some summer shutdown activities that may qualify for SR&ED if they meet the eligibility criteria (see below) include but are not limited to:
- Resolving production issues
- Preventative maintenance
- Production and process trials
- Modifications to equipment to: Reduce environmental impacts, Increase production efficiency, Reduce downtime, Improve operator safety
An eligible SR&ED project demonstrates 3 critical elements:
1. Scientific or Technological Advancement
The generation of new information or the discovery of technical knowledge (not available in the public domain) that advances the understanding of the underlying technologies, or extends their capability beyond their original design.
Keep in mind that this is not the same as improvement of technology infrastructure through acquisition and straightforward deployment of tools developed by another company. Also, generation of new functionality, novelty, or stylistic improvement does not qualify as technological advancement unless the changes trigger issues with the underlying technology, then any new knowledge gained by overcoming or attempting of overcome those uncertainties or obstacles constitutes Technological Advancement.
2. Technological Uncertainties or Obstacles
This means that there is no obvious or readily available solution to the problem in the underlying technology. If you can find a solution online or through normal investigation, it does not qualify.
It is also important to distinguish “technological” uncertainty from other types of uncertainties that are irrelevant to SR&ED eligibility. These are:
- Financial or funding considerations
- A lack of requirements
- A lack of formal or vocational training in a field of science or technology
If, however, qualified technical staff (who are educated/ trained in the relevant field) are uncertain on how solve a technical problem then technological uncertainty is most likely involved.
3. Technical Content
The activities carried out must be performed systematically to resolve the technological uncertainties.
Several different approaches might exist and must be investigated before arriving at an acceptable solution. Random or blanket attempts at a solution (where almost everything is being attempted) do not qualify as SR&ED and are not systematic.
However, when results from failed approaches are used to help determine the next solution to be attempted, the generation and retention of technical knowledge is demonstrated by applying knowledge from a previous attempt and the next approach can be chosen with the highest likelihood of a positive outcome.
Determining now which potential SR&ED projects are in the summer pipeline will yield a great return on time invested. It will also provide an opportunity to simplify the tracking process and ensure that relevant documentation is preserved for your claim. Documentation is critical as financial and technical reviewers have been burned before with fraudulent claims are now on the look- out for this critical information to provide evidence of the work done during the hours claimed.
Relevant documentation includes but is not limited to:
- Records of resources allocated to the project or time sheets
- Design of experiments
- Project records, laboratory notebooks
- Design, system architecture and source code
- Records of trial runs
- Progress reports, minutes of project meetings
- Test protocols, test data, analysis of test results, conclusions
- Photographs and videos
- Samples, prototypes, scrap or other artifacts.