Running a business is stressful enough without having to second guess yourself. You may be wondering if the project your company is working on would even qualify for an SR&ED tax credit. Here are some SR&ED examples to help strengthen your resolve.
Technological Uncertainty
We lead off with an example dealing with the difference between a technical problem and a technological unknown. According to the Canada Revenue Agency, a technical unknown can be solved with existing technology. Alternatively, solving a technological unknown will lead to an advance in technology.
Hence, by fixing a technical problem, a company demonstrates standard practice. But by experimenting with several failed attempts to shake up the conditions that caused the problem, a company would demonstrate overcoming a technological uncertainty. The latter would make that company eligible for an SR&ED grant.
Meeting Cost Targets
Meeting cost targets alone won’t qualify your work for an SR&ED tax credit. However, the technological uncertainty that arises from avoiding a costly process in order to meet those targets could.
Testing Out a Theory
Under certain circumstances, testing a hypothesis from another scientific discovery and applying it to your company’s manufacturing process is a form of SR&ED.
Development Vs. Trial and Error
If you’re not demonstrating your company is analyzing the results of experimental work, you’re not really developing anything new. That’s more trial and error than experimental development, and while the latter could qualify you for an SR&ED tax credit, the former would not.
Some New Products Don’t Qualify
Imagine a company that makes a common product with a unique feature, like a veggie peeler with a glow-in-the-dark handle. It is a new product, no one else is making it, but it doesn’t challenge any technological uncertainty. However, if the same company were to instead redesign the handle to improve ease-of-use, and to experiment with new manufacturing processes to get there, it would meet the SR&ED criteria.
Not All Work Qualifies
Let’s use the example of a hockey stick manufacturer to explain this one. The manufacturer uses a new process and has conducted testing on the first 500 hockey sticks it makes. That work counted as SR&ED. However, the next 1,500 hockey sticks they produced would not.
Other Ineligible Work
Of course, there is plenty of work that sounds eligible on its face, but dig a little deeper, and you may discover that they aren’t. This would include tasks like market research or sales promotion, quality control or routine testing, research in social sciences or humanities, prospecting, exploring, or drilling for materials, style changes, and routine data collection.
In the end, there are plenty of ins and outs that could slow down or stall the entire process. Knowing these SR&ED examples is a start, but you also want an expert in your corner. Talk to Maxim Innovation today to ensure your project checks off the right boxes.
