The Scientific Research & Experimental

Development (SR&ED) Program

A Brief Introduction
October 2010
 What is “SR&ED”?

• The Scientific Research & Experimental Development (SR&ED)

tax incentive program

… money from the government to encourage businesses, from

small to large, to pursue advancements in their own technical
capabilities, regardless of the industry.

• Administered by the Canada Revenue Agency (CRA)

• Provides over $4 billion annually in investment tax credits
(ITCs) to more than 18,000 claimants
• Approx 75% of claimants are small to medium businesses
(SMB)

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 What is “SR&ED”?

• You don’t have to be a research lab to claim SR&ED.

• Here’s a few examples of industries that have successfully claimed:
• Software
• Telecommunications
• Electrical and electronics
• Printing and image processing
• Energy and environment (cleantech)
• Cosmetics
• Food industry (catering, bakeries, food plants, etcetera)
• Manufacturing and metalworking

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What is “SR&ED”?

• Robotics and manufacturing systems

• Tools and dies
• Dental labs

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 What can SR&ED Do For You?

• You may receive:

• A refundable investment tax credit
• A reduction in taxes payable
• Both of the above
 Who Can Claim?

• Canadian Controlled Private Corporations (CCPCs)

• Receive a refundable ITC applied first to taxes payable, refund on
the balance
• Different types of claimed SRED expenditures receive a differing
ratio of refund:
• Payroll – 67%
• Contractor payments – 40%
• Materials – 40%
• Proprietorships, Partnerships, Trusts
• Receive 50% of the refund enjoyed, on the same expenditures,
compared to CCPCs
 Who Can Claim?

• SR&ED work claimed must be related to your business

• fundamental requirement
 Definition of SR&ED

SR&ED is …
“systematic investigation or search
carried out in a field of science or technology
by means of experiment or analysis …
to advance scientific knowledge or to achieve technological
advancement”
 Categories for SR&ED work

• 3 Categories for SR&ED work:

1. Experimental Development (most common): work done to
achieve technological advancement for the purpose of creating
new, or improving existing, materials, devices, products or
processes
2. Applied Research: work done to advance scientific knowledge
with a practical application in view
3. Basic Research: work done to advance scientific knowledge
without a practical application in view
 To Qualify:

• Work must be a systematic investigation carried out by means of

experiment or analysis, and carried out in a field of science or
technology (that is not excluded under the legislation), in pursuit of
advancement or scientific knowledge.
• By systematic they mean:
1. Identifying the obstacle
2. Formulating an objective
3. Developing a plan of action, including method of
experimentation
4. Testing the hypothesis
 To Qualify – three criteria

• Technological Uncertainty
• When trained, experienced professional staff don’t know how
best to proceed
• The pursuit of Technological Advancement
• Seeking… not necessarily finding …success is not a qualifying
criteria
• An incremental improvement to the performance of the
underlying technologies in your project, or your know-how about
them
• Scientific or Experimental Approach
• Systematic, and experimental
 Work Directly in Support

• The law specifies 8 types of supporting work only, which must also be
corresponding to the needs of the core research:
1. Engineering
2. Design
3. Operations Research
4. Mathematical Analysis
5. Computer Programming
6. Data Collection
7. Testing
8. Psychological Research
 Not SR&ED, Not Ever

• The law excludes the following from being claimed:

1. Market research or sales promotion
2. Quality control or routine testing of materials, devices, products or
processes
3. Research in social sciences or humanities
4. Prospecting, exploring or drilling for, or producing minerals,
petroleum or natural gas
5. Commercial production of a new or improved material, device or
product, or the commercial use of a new or improved process
6. Style changes
7. Routine data collection
 Expenditures

• SR&ED is ultimately about linking a body of qualifying technical work

with the costs of doing that SR&ED work, together with work that is
directly in support
• You can claim:
• Salaries and wages
• Materials
• SR&ED Contracts
• Equipment lease costs
• 3rd-party payments
• Capital expenditures
 SR&ED Critical Concept

• A CRA science reviewer:

“the issue is not what you do with the technology, but what you do to
the technology”
 Frequently Asked Questions (FAQs)

• Of course, we’re talking about this program at the very highest

level, so there are bound to be questions.
• Here are some frequently asked questions that we’ll discuss
quickly:
• Q: What about other tax credit or incentive programs? If I claim
SR&ED, can I claim anything else?
A: Claiming SR&ED does not exclude you from claiming
incentives under any other program, whether Federal or
Provincial.
Frequently Asked Questions (FAQs)

• Q: Is there a time limit for submitting SR&ED claims?

A: SR&ED claims must be submitted within 18 months of the
fiscal year-end.

• Q: Does the government control how your refund is used?

A: No.

• Q: Does my filing for SR&ED have any input on how CRA treats
my corporate return?
A: No impact at all.
Other Questions ?

• Questions ?

• Nadya Geddes
416-800-0914
nadyageddes@gmail.com
• Dmitry Brusilovsky
647-588-7777
dmitry@sredunlimited.com
Thank you

• www.sredunlimited.com
• 647-588-7777