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.
There’s still a lot of talk about what tax harmonization means for those conducting businesses in Ontario. (As a refresher – GST and PST will be combined into a new HST, which will result in businesses being charged slightly more for some purchases.) To compensate, the CRA has created the 4.5% Ontario Research and Development Tax Credit. The ORDTC is creditable against Ontario tax for fiscal year ends of December 31, 2008 and later, and is applied to SR&ED claims. It can only be applied for companies that have to pay Ontario corporate income tax.
Some interesting points about the ORDTC:
- The ORDTC was created to compensate for the fact that Ontario taxable income will include the federal ITC from the prior year. Without the ORDTC, Ontario tax would have been higher than in previous situations
- The ORDTC is a non-refundable tax credit, meaning that you can ONLY get tax credits for it
- The ORDTC can be waived if you do not want to receive it, and would not be removed from the expenditure pool
- The ORDTC is applied after the OITC and before the federal ITC, meaning that the pool of expenditures that the federal ITC can be applied to would be reduced.
If you have any questions about the ORDTC, please feel free to contact us!
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
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