Posts Tagged ‘scientific research’

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 SR&ED claim – that way you will continue to claim for years to come.

There was an interesting article posted on the Canadian Business website yesterday about the Xerox corporation, and their continued dedication to R&D efforts despite the fact that they’ve had to make cutbacks everywhere else:

The company is freezing salaries and suspending contributions to retirement plans as part of about US$550 million in cost savings. But R&D? Untouchable. It is Xerox’s lifeblood, says chief technology officer Sophie Vandebroek:

“Easily 75% of our new product sales are things that R&D launched in the last three years” Vandebroek says. “If you stand still, you get commoditized.”
Source

How does Xerox do their R&D these days? As well as their regular R&D team, they work with customers to discover what customers think of potential products, as well as what these customers really want. They determine how customers use their products in their daily lives. And this has helped Xerox avoid another incident like the disaster of the mouse and GUI (graphical user interface): Xerox’s team had developed these two items, but never sold them commercially as Xerox didn’t believe that they would have a market. Other computer companies, after seeing the technologies themselves, then put it the technologies to work and did attempt to sell the computers commercially – and very successfully, at that.

Xerox continues to spend 5% of it’s revenue on R&D every year.

Bottom line? Never forget how important R&D can be. It is what drives your company forward, what allows you to continually offer products that your customers want.

Worried about the cost of R&D for your company? In Canada, the federal government provides tax refunds and credits for companies that perform R&D; most provincial governments also provide incentives for performing R&D.

During tough economic times, companies need to take advantage of internal sources of financing in order to survive. One source of financing, which few companies are aware of, are the tax credits you can receive from the federal government for R&D work conducted in the past 2 fiscal years.  The Scientific Research and Experimental Development (SRED) tax credit  can generate a return of up to 35 percent of your expenditure base.

The CRA has recently developed a SR&ED Small Business action plan which contains four distinct objectives:

1. Ensuring public awareness of the SR&ED program and services
2. Making our SR&ED publications easier to understand
3. Improving accessibility to the SR&ED pages on the CRA Web site
4. Introducing a simplified SR&ED claim form and an eligibility self-assessment tool

In fall of 2008, the following will be released:

• Distribution of a 1-page outline of the SR&ED program
• A SR&ED CD-ROM will be released.
• A new brochure will be released.
• A simplified T4088 Guide to the T661 will be released.
• A clear format for submitting technical narratives will be incorporated into the new simplified SR&ED claim form.

Please go to the CRA‘s website for further detail about these proposed changes to the SR&ED program.