Archive for the ‘Innovation’ Category

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.

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.

As of June 27, 2006 the federal government announced it has put more on the case! The case of course is the SR&ED Tax Credit Program. Federal Budget Commitments have increased funding for the programs capacity and level of service to claimants. This is good news for claimants and consultants alike. There have been calls for changes to the overall program for a while now. The CRA admittedly by its’ actions have not done a great job in publicizing the program to Canadian business. Since the fall of 2007 they have been working on an action plan to make the SR&ED program more effective. The 3 big areas they targeted are a simplified guide and claim form, development of a self–assessment for eligibility and a review of policies and procedures. The goal is to improve consistency and predictability and quality of the claims process. This announcement is to follow up the changes to the SRED Program 2007-2008 from the beginning of the year. To see the status of the Small Business Action Plan go to http://www.cra-arc.gc.ca/taxcredit/sred/whatsnew-e.html

I have been working on an idea for my first blog post. I have been looking on business sites and learning about innovative ideas in the marketplace. I looked at serious social issues, world trade issues and nothing has hit me over the head as to this is the article I should write! I looked at what influences our business community and daily lives more than anything else and I came up with “Products”. Our whole economy is built on selling and introducing product. Companies thrive on introducing new products into the marketplace. To remain relevant and competitive there is a constant need to improve. Companies do this by innovating. As I wrote that last line, I discovered my topic; innovation and what people see as innovation in their lives.

People think in order to be innovative you need to create something totally brand new, not the case. Most innovation is really an improvement to something that has been around forever. Take a look at the microwave, when it came out, it most definitely was an innovation. But is it not just an improvement to the stove? I think that can be said for a lot of innovations. Is the bicycle not just an improvement to the unicycle? I think in fact that it is the other way around with the bicycle, but I digress. A definite improvement is easy to spot and because of that most people think they know what an innovation is. Innovation can be classified on a smaller scale; it can be a new way to seal a container or adding ingredients to a baked good recipe to shorten baking time. It is not normally seen by the naked eye. The problem a company has when trying to identify their innovation is that it goes unnoticed. Companies are so absorbed in the final product that they don’t see the innovation that happens along the way.

There is definite value in finding innovation in your company. I can speak to this when it comes to ITC’s (Innovative Tax Credits). Until an outsider like myself points it out to them, most companies I visit don’t realize how innovative they are. Sometimes it takes someone impartial to see what they’re missing right under their own noses.

So what do people see as innovation in their lives? Well, from my standpoint they are not getting the whole picture. Everyone can assume that innovation is something totally new and different and never been seen before, but there are smaller innovations that happen all the time that go unnoticed.