Aggressive offshore competition isn’t new to us here. Let’s face it – it can be tough to survive when products similar to yours can be purchased for a fraction of the price from a company that doesn’t even operate in Canada. This can lead to a huge reduction in sales, can result in non-profit situations, and can cause difficulties for any company that is trying to remain competitive. In some cases, this causes business closures.

Businesses need to do what they can to offset those financial situations, and reclaiming costs for projects where you faced challenges can help your company become profitable again.

The SR&ED (Scientific Research and Experimental Development) program can definitely assist in situations like this – a lot of expenses can build up through test runs, failed projects and lengthy experimentation, and reclaiming some of these costs can make a very large difference in a company’s financial standing. The recovered costs can help offset the effect that offshore competition may have on your business, and can be used to invest back into your company.

Have you taken a look at how SR&ED can help you remain competitive with offshore competition?

We often tell people that failed projects are embraced by the SRED program, and sometimes it can be a little hard to understand exactly why. I mean, isn’t the program meant to promote innovation, and to encourage technological development? If so, then why are projects that don’t result in a more innovative product or process applicable for the SR&ED program?

This goes back to the three criteria of the program: Technological Advancement, Technological Obstacles and Technical Content.

When looking at a failed project, you most likely faced a number of Technological Obstacles while working on it – these obstacles are anything that prevented you from getting to the final objective, so obviously in a failed project you faced a number of obstacles.

The technical content shows the systematic investigation that was done while trying to reach the final objective, which would be done for both failed and successful projects.

Lastly, your knowledge has been expanded in the instance of failed projects as well – in these instances, you now have the knowledge that there is no way that you have found to get to the final objective.

So yes, failed projects definitely qualify for the SR&ED program, as long as they too fulfill the three criteria of the program.

With the number of government grants, loans and other assistance available, we have frequently been asked whether companies can still file for the SR&ED program if they’re taking advantage of other assistance programs. There are so many different programs available: from IRAP, to small business grants, to funding that will help make things more energy efficient, to workshare programs, just to name a few.

So what does this mean when a company files for the SR&ED program? CAN a company get money back through the SR&ED program if they’ve already received some sort of government assistance for the project?

Well, the short answer is both yes and no.

Mainly, it depends on how much of your project was covered by other government assistance programs. If your project was fully-funded by other grants and loans, then your project is unfortunately not applicable for the SR&ED program.

Or, as it more often happens, if your project was only partially funded by the government, then you can claim for SR&ED on the portion that was not funded.

The SR&ED program is vital for any Canadian business doing work that runs into technological obstacles – don’t forget to include it in your funding plans.

Nortel is in the news again!

A giant in the IT Industry and Canada’s one time largest employer have been force to sell off it’s assets due to bankruptcy. This time it is their wireless network infrastructure to Nokia Siemens Networks. IT is an industry ripe with innovation and Canada needs innovation in order to compete in the world marketplace. How can Canadian Industry compete with cheaper overseas labour and the economic down turn? Many companies turn to government programs like the SR&ED (Scientific Research and Experimental Development) tax credit program to help fund their innovation.

Many SME’s in Ontario capitalize on the 41.5% return on labour and material costs incurred from R&D. It is important to talk to an expert in SR&ED to gain the most from a your claim. An SR&ED consultant can assess if you actually have SR&ED eligible projects, what you can expect to get in return and prepare you for future SR&ED claims. Claiming SR&ED on a yearly basis can reap financial rewards for your company’s innovation and keep you manufacturing in Canada.

Without a consultant you could end up claiming less than you otherwise would have. The CRA, who administers the program, has said that a majority of the claims they see claim far less than what they should. You may not be able to identify all the projects that qualify, where a consultant can be that second pair of eyes that can catch any additional projects. A consultant should look at all the areas in your business and not the areas that are most prevalent with SR&ED activities. Areas that have SR&ED some of the time may incur the most labour and material expense because SR&ED does not happen there regularly. Most importantly a consultant works for you and it is in their best interest that you have a viable SRED claim – that way you will continue to claim for years to come.

Thorough documentation is a necessity when making an SR&ED claim. Good documentation proves to the CRA reviewers who are looking into your claim that you have done all the work to get through the technical obstacles that you claim to have done. The more documentation that you have, and the better quality it is, the better supported your claim is.

There are two types of documentation that you will need when supporting your claim – technical documentation and financial documentation. Technical documentation shows that some sort of technical advancement has taken place, and financial documentation is to check costing.

Some examples of technical documentation are drawings and photographs, whereas examples for financial documentation are invoices and T4s.