Understanding The Scientific Research And Experimental Development Program

Guest Post | Oct 21, 2020

Scientific Research and Experimental Design Program - Understanding The Scientific Research And Experimental Development ProgramIt's essential for businesses in Canada to keep up to date with the latest programs and initiatives that could be of benefit to their brands, and any company investing in scientific research or experimental development should absolutely be aware of the SR&ED program. This guide will take a look at what the SR&ED program is, how it works, how eligibility works, and so on.

What Is the SR&ED Program?

The SR&ED program stands for Scientific Research and Experimental Development. It's a tax incentive program, designed to encourage more companies to carry out research and development activities in Canada. Each year, more than 20,000 individual claimants are awarded over $3 billion in tax incentives, and the vast majority of companies benefiting from this scheme are small businesses and start-ups.

Tax incentive programs like the SR&ED program have been used in Canada for decades, and the SR&ED program is yet another example of Canada rewarding companies that carry out important research and innovative development within its borders. It's the biggest single support program for research and development in the nation of Canada, and when compared to the programs of other countries, it's also one of the most generous and well-thought-out.

The basic aim of the program is to get more advancements and exciting new products and services being created and launched in Canada, strengthening the economy and reinforcing the country's ever-evolving technology and science fields. There are some really exciting success stories from this program too, with companies like Turkana Inc. and Autovance Technologies taking full advantage.

How Can Your Business Benefit?

If your business carries our scientific research and experimental development in Canada, you could be in line to benefit from the SR&ED program. There are even services designed to complement the program to maximize benefits for each business. Here are the two main ways you can take advantage of SR&ED:

  • Pool all SR&ED expenditures together and deduct them against either your current year income or a future year income.
  • Earn the SR&ED investment tax credit, which can be used in place of income tax payable or may be obtained as a cash refund.

How Does Eligibility Work?

It's important to note that not all activities that fall under the wide banner of scientific research and experimental development will actually qualify as eligible for this particular program. This is why it's important to read the fine print and understand exactly how the initiative works, before considering your own application.

In order to qualify to be a part of the SR&ED tax incentive, your work should be carried out in Canada and should fall into one of the following three categories:

  • Basic Research - This kind of work is designed to further a company or institution's scientific knowledge, without necessarily having a practical end-product or service in mind. This sort of research is typically carried out at colleges or research labs.
  • Applied Research - Similar to basic research, this kind of research is also undertaken to expand scientific knowledge and understanding, but with a practical application, such as a new product or service, in mind.
  • Experiment Development - The most common form of SR&ED work, experimental development is designed to pursue technological advancement of some kind. This may include carrying out studies and tests to gain new scientific and technological knowledge that can be used to create new technologies or enhance pre-existing ones, or the process of developing something entirely new.

See:  The Impact of Coronavirus on Funding Innovation

What Isn't Eligible?

When it comes to meeting the eligibility requirements, many companies are unsure if their work qualifies, as the research and development conditions can seem quite vague or broad. Here are some examples of work that don't qualify as part of the program:

  • Research in social sciences
  • Quality control tests and assessments for products and services
  • Commercial production of new products
  • Market research and related marketing

Final Word

The Scientific Research and Experimental Development tax incentive program is an exciting initiative from the Canadian government that helps thousands of companies, both big and small, each and every year. It can make a real difference to new start-ups and small businesses, in particular, and could help to shape the future of Canada's technological landscape for years to come.

This guide should help you better understand the SR&ED program, regarding specific eligibility requirements and so on, and you can also reach out and contact SR&ED experts to learn more and begin the application process.

 

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