Archive for the ‘SR&ED’ Category

Budget 2019: Highlights for Businesses

Federal Finance Minister Bill Morneau’s election year budget, tabled on March 19th, 2019, forecasted a deficit of $19.8B for fiscal 2019, with deficits projected to decline gradually to $9.8B by 2023.

No additional measures were proposed to provide business tax reductions, or to address the 2018 Fall Economic Statement announcements regarding an Accelerated Investment Incentive or the immediate write-off of manufacturing/processing and clean energy machinery and equipment in response to the recent U.S. tax reform.  

The initiatives proposed in Budget 2019 are heavily focused on investments in skills and training and offer some limited benefits to Small- and Medium-Sized Enterprises (SMEs).

SR&ED Enhanced Tax Credit Rate Eligibility Amended

The Scientific Research and Experimental Development (SR&ED) Tax Incentive Program provides a  basic 15% , non-refundable credit to all businesses performing SR&ED in Canada. Eligible small and medium-sized companies can qualify for enhanced 35% refundable tax credit rate of qualifying SR&ED expenditures up to $3M per fiscal year.

Eligibility for the 35% rate is determined by a business’ level of taxable capital and income from the prior fiscal year. 

  • The taxable capital threshold is between $10M and $50M.
  • The taxable income threshold begins at $500,000 taxable income in the prior year and reduces current fiscal year eligibility for the enhanced credit on a sliding scale until $800,000 taxable income in the prior year.

Budget 2019 proposed to eliminate the income threshold to qualify for federal enhanced (refundable) SR&ED investment tax credits for taxation years beginning on or after March 19, 2019, for SMEs, in order to increase support for SMEs that are scaling up their R&D efforts or have variable income from year to year. The capital threshold will continue to apply.

The proposed changes will allow SMEs to continue to receive refundable tax credits on up to $3M in expenditures, regardless of their profitability. 

Corporate Rates and Employee Stock Option Deductions (Compared to U.S. Tax Measures)

Despite tax-payer anticipation for Canadian corporate tax rate reductions in accordance with recent U.S. tax reform, there were no proposed changes in Budget 2019 to the corporate income tax rates or to the $500,000 Small-Business Deduction Limit for Canadian-controlled private corporations (CCPCs).

Budget 2019 proposed to impose a $200,000 annual cap on employee stock option grants for employees of large, long-established, mature firms in alignment with the U.S. tax treatment. Employee stock option benefits of startups and rapidly growing Canadian businesses will remain uncapped.

Further details of this measure will be released before the summer of 2019.

Canada’s Innovation and Skills Plan is Ongoing

Canada’s Innovation and Skills Plan was launched in 2017 to help Canadian businesses start up, scale up, and become globally competitive.

  • In February 2018 the Government announced a $950M investment in five regional industry-led innovation superclusters including digital technologies, food production, advanced manufacturing, artificial intelligence in supply chain management, and ocean industries. These superclusters have assumed operation and are expected to create 50,000 jobs and add $50B to the economy over the next 10 years. 
  • The $1.2B Strategic Innovation Fund was launched in July 2017, to spur Canadian innovation by supporting the costs of direct labour, subcontractors, and consultants, as well as overhead, direct materials and equipment, land and building, and other direct costs. As of January 2019, the Fund had secured 31 investment agreements from leading researchers and manufacturers, worth a total of $8.1B, including a federal investment of $795M. Budget 2019 proposes to provide a further $100M over four years, starting in 2019–20, to the Strategic Innovation Fund (SIF).  The SIF will leverage private sector co-investments in order to support the activities of the Clean Resource Innovation Network.
  • Innovative Solutions Canada was launched in December 2017, replacing the Build in Canada Innovation Program (BCIP), to help companies bridge the technology gap between the R&D stage of projects and the pre-commercialization phase through government acquisitions. The program will dedicate over $100M annually by the end of March 2020 to support challenges issued by twenty participating federal departments and agencies to address federal government needs.
  • The first Canadian National Intellectual Property Strategy was proposed in Budget 2018. Budget 2019 announced intent to move forward with a pilot Patent Collective, to help Canadian start-ups and small and medium-sized enterprises pool together vital intellectual property assets.

Workforce Development Investments

Budget 2019 proposed investments in talent acquisition and skills training that impact businesses including: 

  • $35.2M over five years, starting in 2019, with $7.4M per year ongoing to make the Global Talent Stream a permanent program to give Canadian businesses enhanced access to top global talent. The Global Stream Talent pilot project was a part of the Global Skills Strategy that was announced in the 2016 Fall Economic Statement.
  • More than $1.7B over five years, and $586.5M per year ongoing to: (1) implement a Canada Training Benefit which will include a new, refundable Canada Training Credit (CTC) to help cover up to half of eligible tuition and fees associated with training, and (2) to implement a new Employment Insurance Training Support Benefit to provide income support when an individual requires time off work As of 2019, eligible individuals will be able to accumulate $250 annually (up to a maximum of $5,000 over a lifetime) that can be applied towards eligible expenses beginning in 2020.
  • An additional $150.0M over four years, starting in 2020, to Employment and Social Development Canada to create up to 20,000 additional work-integrated learning opportunities annually in partnership with innovative businesses.

Additional Funding Proposed in Budget 2019

  • $100M over three years (on a cash basis), starting in 2019, to Western Economic Diversification Canada to increase its programming in western Canada.
  • New Strategic Science Fund starting in 2022, which will operate under a principles-based framework for allocating federal funding for third-party science and research organizations. The Minister of Science will provide more detail on the Fund over the coming months.
  • Implementation of new Regulatory Roadmaps for reviewing and modernizing regulatory requirements and practices that impede innovation and growth in the following high-growth sectors:
    • Agri-food and aquaculture
    • Health and bio-sciences
    • Transportation/infrastructure

This includes the establishment of a regulatory sandbox for new and innovative medical products such as tissues developed through 3D printing, artificial intelligence, and gene therapies targeted to specific individuals. Further details will be released in the coming weeks.

Ontario Budget 2018 Highlights

The Ontario 2018 Budget, tabled on March 28, 2018, projects a growing deficit over the next three years and is predicted to resume a downward trend in 2022 with accumulated deficit expected to decline from 23.2% of gross domestic product (GDP) in 2017-18 to 22.1% by 2022.

The Ontario Budget proposes several measures and investments that impact businesses, including:

Innovation

  • An increase to the Ontario Research and Development Tax Credit (ORDTC) from 3.5% to 5.5% for eligible R&D expenditures over $1M (per taxation year) incurred on or after March 28, 2018.
  • Enhancements to the Ontario Innovation Tax Credit (OITC) for eligible R&D expenditures incurred on or after March 28, 2018 based on the ratio of R&D expenditures to gross revenues. Companies with a ratio of R&D expenditures to gross revenue of:
    • 10% or less will continue to claim the OITC at a rate of 8%;
    • 10-20% will be eligible for an enhanced OITC rate that will increase from 8% to 12% on a straight-line basis; and
    • 20% or more will be eligible to claim the OITC at a rate of 12%.
  • Expansions to the Ontario Interactive Digital Media Tax Credit (OIDMTC) eligibility criteria to include broadcaster purchased or licensed film/television websites that host film, television, or Internet production content not previously assessed (before Nov 1, 2017).
  • A review of various tax incentives implemented in other jurisdictions such as preferential corporate income tax rates (i.e., patent boxes), tax refunds, tax deductions, and exemptions with the intention of developing a provincial incentive to encourage Intellectual Property (IP).
  • An additional $50M over 10 years for the New Transformative Technology Partnerships Fund for businesses, SMEs, and scale‐ups as well as post-secondary and research institutions to collaborate on new dynamic products and services in artificial intelligence (AI), 5G wireless communications, autonomous vehicles, advanced computing, and quantum technologies.

Business Growth

  • In parallel with the 2018 Federal Budget proposal to phase-out or grind the $500,000 small-business limit, the Ontario Budget proposes to phase out the small-business limit on a straight-line basis for CCPCs (and associated corporations) earning between $50,000 and $150,000 of passive investment income in taxation years beginning after 2018.
  • Ending the electricity debt retirement charge (DRC) for mid-sized commercial and industrial non-ICI or non-RRP, Class B consumers as of April 1, 2018.
  • An additional $100M over 10 years for the Eastern Ontario Development Fund (EODF) and the Southwestern Ontario Development Fund (SWODF) to support regional economic development by creating jobs, attracting private sector investment and promoting innovation, and encouraging collaboration and cluster development.
  • An additional $500M over 10 years for the New Economy Fund for investing in priority sectors such as advanced manufacturing, information and communication technology (ICT), life sciences, and clean-tech.
  • An additional $85M over 3 years for the Northern Ontario Heritage Fund to stimulate economic development and diversification across the region.
  • An additional $100M over 10 years for a new Greater Toronto & Hamilton Area Fund to support SMEs in the GTA and Hamilton area.

Export Market

  • Work to implement a Global Trade Strategy to diversify and promote trade in Ontario. This will include the Accelerate to International Markets program, the Global Growth Fund, and the Magnet Export Business Portal.

Startup Support

  • An additional $85M over 10 years for a new Venture Technology Fund to support a select number of very high‐potential, fast‐growing firms in expanding to become globally competitive.
  • An additional $15M over the next 3 years to NextAI, a Toronto based accelerator for early stage startups that leverage AI technologies.

Workforce Development

  • An additional $170M over 3 years for the new Ontario Apprenticeship Strategy to support transition into apprenticeship from high school, make the system easier to navigate, and to improve access for apprentices to high‐quality jobs upon completion.
  • Transforming the Apprenticeship Training Tax Credit (ATTC) into the new Graduated Apprenticeship Grant for Employers (GAGE) to encourage employers to ensure that apprentices complete their training.

Our Manufacturing Roots Run Deep

Before building a SR&ED and government funding consultation business, Sol Algranti, President and CEO of Northbridge Consultants, worked in the manufacturing industry for many years.

After finishing education in a high school for skilled trades, Sol began working in a large plastics manufacturing company where he gained practical knowledge of various plastic processes including injection moulding, blow moulding, extrusion and co-extrusion. He completed his Bachelor’s degree in Mechanical Engineering while working for an optical glass manufacturer, where he developed improved processes and designed pneumatically-controlled machines. After completing his Master’s degree in Systems Engineering, Sol worked as the Chief of Planning/Scheduling in a large plastic pipe manufacturing company and started a metallurgy business, providing metal heat treatment services to manufacturing companies.

Sol applied his expertise to improve manufacturing methods, and to reduce costs as the process engineer for Westbend of Canada in Barrie, Ontario. Thereafter, Sol’s expertise in plastics earned him the position of Advanced Manufacturing Engineer at Camco (Canadian Appliance Manufacturing Company), where he was responsible for all plastics processes and optimized operations in the large Hamilton, London and Montreal facilities during a major transition period. Sol then moved to a position at ABC group for MSB Plastics as the general manager for their struggling Toronto facility.   Sol worked 6 days per week to optimize operations and within two to three months, he had transformed it into a profitable operation.

In 1989, Sol negotiated a leveraged buyout to acquire Shirlon Plastics, an established Cambridge-based manufacturer of plastics products with a niche in the Canadian Recreational Vehicle (RV) industry. Less than a year later, the 1990 recession began and the RV industry was one of the hardest hit sectors, forcing many RV manufacturers to go out of business. On the brink of bankruptcy, Sol  worked relentlessly to expand his market base to the United States, and took huge financial risk to invest in the diversification of his product line. His efforts paid off and enabled Shirlon to not only survive the recession but to thrive afterwards.

Sol expanded his business through a diversification into gardening products, and through the acquisition of several companies including a large vacuum forming and sheet extrusion company, a plastics rotational moulding business, and a custom mould manufacturer.  He relied on intensive R&D to improve his product line, to increase market share, and to remain competitive, he began claiming for SR&ED tax credits. The funding he received from the SR&ED program was reinvested into the development of new products and new technologies. By 2007, Sol had 6 manufacturing companies in plastic products and tooling industries and continues today to be involved in manufacturing through his remaining plastics company, investments, and consulting practice.

Sol’s profound background in research and development in the manufacturing sector has provided Northbridge with a strong foundation in the SR&ED program. Moreover, Sol’s manufacturing heritage gives NorthBridge a unique understanding of the risks that manufacturers take when they invest in R&D and the overall challenges that manufacturing businesses face when trying to grow and remain competitive.

Free Seminar: Learn How to Manage IP & SR&ED to Boost Corporate Value

When it comes to intellectual property (IP) and Scientific Research and Experimental Development (SR&ED) tax credits, CFOs must constantly assess the value of the services that they receive in exchange for engagement fees. Making this assessment can be challenging to the point of frustrating. CFOs must keep the bigger picture of overall financial health of their organization, while dealing with a complex management regime consisting of CTOs and CMOs. Further challenges arise due to complex and opaque billing practices by law firms and SR&ED consultation firms.

Agenda for SR&ED:

  • Basic overview
  • Tracking experimentation for CRA compliance
  • Labour tracking for CRA compliance
  • Integrating SR&ED intro tracking systems
  • Setting up a strategy

Agenda for Intellectual Property:

  • Basic overview of IP regimes
  • Identifying points of differences in your business
  • Selecting an appropriate IP regime that provides a barrier to entry for those points of difference
  • Setting an IP strategy for your company
  • Setting an IP management committee
  • Business case criteria for IP filings
  • Setting fee schedules and billing practices to maximize transparency and accountability

Event details:

Speakers:
Gerry Fung, CPA CMA, P.Eng.
VP of Business Services at NorthBridge Consultants

Andrew Currier, BSEE, LL.B., P.Eng.
CEO of Perry + Currier Inc.

Date & Time:
Friday, 22 September 2017 from
8:00 AM to 10:00 AM (EDT)

* Eligible for substantive hours

Location:
PCK Perry + Currier Inc.
500-1300 Yonge Street
Toronto, Ontario M4T 1X3
Canada (MAP LINK)

Register Online 

For more information please contact:

 NorthBridge Consultants
1-519-623-2486 x230
ela@northbridgeconsultants.com

or

PCK IP
1-416-920-8170 x136
low@pckip.com

EMC Strategic Interest Group Networking Event

OWEN SOUND & AREA

BRUCE | GREY | HURON

Event Details:

Date: Wednesday, January 25, 2017

Location: Hobart Food Equipment Grp; 2875 East Bay Shore Rd, Owen Sound (MAP)

To register for this event please contact Jeff Mitobe

Agenda Items:

  • Welcome, Introductions & EMC Update
  • Discussion as per SIGs below
  • Plant Tour
  • Roundtable Networking

Financing Opportunities and SR&ED (8:00 – 9:45)

  • Please join us for an interactive presentation by NorthBridge Consultants on the many Government Funding Opportunities available to manufacturers and the Scientific Research & Experimental Development (SR&ED) Tax Credit Program
  • Learn how Hobart has utilized the Lighting Retrofit Rebate and their expected year over year savings
  • Making SR&ED a part of your workday
Plant Tour/Best Practice Walk (9:45 – 10:30)

  • Safety Shoes, Safety Glasses, Hearing protection
Integrating Multiple Demographic Groups (10:30 – 12:30)Are you struggling to integrate different demographic groups in your workplace?How do you build a bridge between the 20-somethings and the 40-somethings?–Is it even necessary?Have you come to realize that a person’s challenges outside work are NOT left at the door?–How do you propose to accommodate them?

  • Mike will share examples of the struggles Hobart is facing in hiring & integrating demographic groups.
  • Please arrive prepared to share and discuss any policies and procedures which you feel are starting to show fruition or have utterly failed.
Reminder to Members: Please visit your home consortium page on EMC’s website for more information on upcoming events, online SIG registrations and more!If you are a member, come out to our next local event to meet your neighbors again. If you are not yet involved, get in touch…the manufacturers down the street want to meet you, and so do we.

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  • NorthBridge Consultants' Government Funding Blog is dedicated to bringing businesses news and information to help them identify and access the most appropriate government funding programs.

    We offer opinions and insider information that can provide a pulse on government initiatives, the health of the Canadian economy, and firsthand thoughts from Canadian business owners.

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