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 hires, expanding your facilities, taking 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
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
