When deciding whether to gather sr&ed information and make a sr&ed claim many companies often wonder what types of work qualifies for sr&ed tax credits. A sr&ed project is defined by the Canadian Revenue Agency as “a set of interrelated activities that collectively are necessary for the attempt to achieve the specific scientific and/or technological advance(s) defined for the project, are required to overcome scientific and/or technological uncertainty, and are pursued through a systematic investigation by means of experiment or analysis performed by qualified individuals. In order to better understand this statement we will examine its key points in further detail.
Work that sets about to achieve a specific scientific or technological advance or overcome a scientific or technological uncertainty can consist of a vast amount of tasks. In general if a company is attempting to create a new or improved product or process and the work required to do so is not standard practice it is likely that the work will qualify as sr&ed. Work to improve a product or process or create an entirely new product or process will generally contain setbacks or difficulties that must be addressed, these setbacks form the basis of the “uncertainties” that need to be overcome within a sr&ed project. By collecting information about the setbacks and difficulties that occur while trying to improve a company high quality sr&ed information will be created which can be utilized during the claim process.
The setbacks and difficulties present within a sr&ed project are often the cause of the project being completed in an iterative manner as a solution to a problem is devised, the solution tested, and the results gathered. If the solution is successful the process will be complete however if the solution requires further refinement the process must be repeated for another iteration. This iterative process will normally establish that the project has been completed in a systematic manner as the individuals working on the project will attempt to learn from each iteration how to best solve the problem.
The individuals participating in the sr&ed project as well as the collection of sr&ed information are required to be qualified in the area which they are involved in the project. The qualifications held by the individuals will be as diverse as the tasks required to perform the project. As an example a new product may be designed by an engineer but the prototype fabricated by a press operator, the engineer is qualified to design the product but not qualified to operate the press and visa versa. As we can see the work done by both individuals contributes to the completion of the product and as such sr&ed information related to the labour of both individuals should be recorded.
By better understanding what work qualifies as sr&ed and collecting the appropriate sr&ed information a stronger sr&ed claim can be made and greater rewards gained through the filing process.