The SR&ED program is one of the largest government incentive programs in Canada. There are many common misconceptions about SR&ED tax credits. Hopefully, after reading this blog you’ll have a better understanding of the complex world of SR&ED tax credits and their common misconceptions!
#1 SR&ED is a Grant ‒ Myth!
A grant is money given by the government or another company for a particular purpose. However, this is not a grant; it is a tax credit. It incentivizes companies to increase their investment into research and development! The SR&ED program is applicable to both large and small companies.
Some of these tax credits are refundable, others are not. SR&ED is a program that helps you recover the costs from research and development expenditure. This credit is available to companies even after they’ve paid their R&D expenses.
#2 My Project Failed, I Can’t Qualify for SR&ED ‒ Myth!
SR&ED stands for Scientific Research and Experimental Development. Experimental is right in the name! Many valuable lessons and insights are discovered through experiments. Failure does not mean that there was no information gained from conducting the project. People learn from their mistakes and their failures. This is why “failed” projects still qualify for SR&ED incentives. Any project that can provide valuable insight into scientific research and experimental development may be eligible for the tax credit as long as the company undergoes a systematic process to try to overcome the uncertainty.
#3 I’m Planning to Sell My Technology, I Won’t Qualify for SR&ED ‒ Myth!
There are certain guidelines and qualification requirements, but there are many scenarios in which companies can qualify for the tax credit. Click the button below to visit the SR&ED section of the CRA’s website.
#4 I Can’t Qualify for SR&ED Because I have a Grant Already ‒ Myth!
Even if you are receiving other funding, you can sometimes claim funding from SR&ED for costs that aren’t covered by the alternate program. Some government funding programs, such as the Canadian Emergency Wage Subsidy (CEWS,) will limit the amount of money you can claim for SR&ED.
Click here to calculate how much funding you can receive through the SR&ED tax credit!
#5 I Run a Non-CCPC Company, I Can’t Qualify for Any SR&ED Tax Credits ‒ Myth!
There are three different types of tax credits available through SR&ED in Ontario:
- Investment Tax Credit (Federal) (ITC),
- Ontario Investment Tax Credit (OITC),
- Ontario Research and Development Tax Credit (ORDTC).
The breakdown is more complicated than what is about to be explained, so click here for more information.
If you are a non-CCPC company, you may qualify for a 10% refund on the OITC. The other two (ORDTC and ITC) are both non-refundable tax credits, but they are still available to non-CCPC companies.
For CCPC companies, the ORDTC is also not a refundable tax credit. The real noticeable difference between the CCPC and non-CCPC is that the ITC is refundable in one, and not in the other.
Have Any Questions or Concerns about What You Might Be Able to Qualify For?
Reach out to our experts!
At Maxim Innovation, we can help you determine your eligibility and guide you in the SR&ED claims process.
