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?

A press release has been issued about some upcoming changes to the SR&ED program. A few points mentioned by Minister Blackburn today, while addressing the 13th Annual Tax Practitioner Information Session, relate to upcoming changes to the SR&ED program:

• starting on April 1st, 2010, reviewers will be spending more time explaining the program (requirements, application process, decisions made, etc) to claimants. Starting on the same date, if the CRA finds a company is missing eligible projects, they will let that company know sooner so they can resubmit their claim within the filing deadline.
• beginning in July, the CRA will be posting quarterly reports on their website as to how long it takes for them to review an SR&ED claim from start to finish.

These changes are a result of some of the feedback they have been receiving about the SR&ED program lately, especially in relation to the consistency of the program.

Minister Blackburn has also said that there will be more changes to the program in the future – we will be reporting on these changes as soon as we have word about them.

We often tell people that failed projects are embraced by the SR&ED 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.