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Fund Description

SR&ED stands for Scientific Research and Experimental Development. The Canada Revenue Agency (CRA) offers tax credit incentives and refunds for companies that perform Research and Development in Canada. The SR&ED program was created in the mid-1980’s to encourage technical development in Canada, and each year it provides an average of over $3 billion to Canadian companies.

If you are developing a new technology, improving existing technology, products or processes, you could be eligible to receive tax credits or cash refunds under the SR&ED program. While many other countries have similar programs, Canada’s SR&ED program is one of the more lucrative of tax-incentive programs for companies performing research and development.

Funding Details

Benefits of SR&ED

Qualified Canadian Controlled Private Corporations (CCPC’s) can receive up to 35% back of eligible expenditures incurred in the development of new or improved products or processes. Foreign-owned or public corporations can qualify for a 15% tax credit on eligible expenditures.

Most Canadian provinces offer additional tax credits on qualified SR&ED expenditures. Depending on the province, SR&ED claimants can earn additional provincial SR&ED tax credits. Read more about provincial tax credits to find out your province’s rate of return.

The funds that you receive from the SR&ED program can be invested back into your business in the form of new equipment, new hiresexpanding your facilitiestaking on more challenging projects, or paying down debts.

Eligible Expenditures

How SR&ED Tax Credits are Calculated

The following charts show the value of tax credits from an example set of expenditures:

Example Return

Example of SR&ED Expenditures

Calculation of Qualified SR&ED Expenditures Expense SR&ED Eligible
Labour/Wages (T4) $500,000 $500,000
Overhead (via Proxy: 55% of T4 Labour) $275,000
Materials Destroyed + Transformed $105,000 $105,000
Arms-length Subcontracts (80%) $150,000 $120,000
R&D Capital/Equipment $500,000 $0
Total Qualified Expenditures $1,255,000 $1,000,000

 


Example of Calculating Tax Credit in Ontario (CCPC)*

Before After
SR&ED Expenditures $1,000,000 $1,000,000
Ontario – OITC (10%/8%***) $100,000 $80,000
Ontario – ORDTC (4.5%/3.5%**) $40,500 $32,200
Federal – ITC (35%) $300,825 $310,730
Total SR&ED Benefit For You (~44.1%/42.3%) $441,325 $422,930
* CCPC – Canadian Controlled Private Corporation
** ORDTC was reduced from 4.5% for expenditures incurred after June 1, 2016
*** OITC was reduced from 10% for expenditures incurred after June 1, 2016

 


Example of Calculating Tax Credit in Ontario (non-CCPC)

Before After
SR&ED Expenditures $1,000,000 $1,000,000
Ontario – ORDTC (4.5%/3.5%**) $45,000 $35,000
Federal – ITC (15%) $143,250 $144,750
Total SR&ED Benefit For You (18.8%/18%) $188,250 $179,750
** ORDTC was reduced from 4.5% for expenditures incurred after June 1, 2016

Fund Application

How NorthBridge Will Assist With SR&ED and Other Funding Programs

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NorthBridge is a full-service professional engineering firm, which excels at working with you to make sure that you receive the best value from your SR&ED claim. We employ full-time engineers to assure the thoroughness of every claim that we complete, and that all eligible projects are included with your SR&ED claim.

NorthBridge has over 20 years of experience assisting companies with government funding programs. We will:

  • Listen and discuss past, present and future project activities.
  • Research and identify the appropriate and optimal government grant, tax incentive, loans, as well as private financing opportunities.
  • Take a hands-on approach to the application process and address relevant program objectives and criteria.
  • Become an in-house project manager for all types of government funding.
  • Interview the key employees and ask specific questions in order to make the right funding decisions.
  • Assist in writing the application and preparing all supporting documentation.
  • Assist with government reporting requirements.

To arrange for a free, no obligation consultation with one of our government funding experts contact us at: info@northbridgeconsultants.com

 

Other Innovation Funds

Industrial Research Assistance Program (IRAP)

AgriInnovation Program