The Scientific Research and Experimental Development (SR&ED) tax credit is a business assistance program administered by the federal and provincial governments to encourage and support organizations to undertake research and development (R&D) activities that they may not otherwise be willing to attempt.
At the federal level, a 15% non-refundable tax credit on qualified expenditures is available. Certain Canadian-controlled private corporations are eligible for a 35% refundable credit on the first $3 million of qualified expenditures, and provincial tax credits, which may also be refundable, are also available. The provincial credits range from 4.5% to 30%.
The SR&ED program includes a rigorous regulatory regime, which means claimants need to focus on thorough eligibility assessments and substantiation of claims.
To help navigate these requirements, PwC has developed a methodology specifically for this purpose. We advise companies, from large multinationals to nimble start-ups and everything in between, on the program. In addition to supporting our clients with claim compliance and preparation, we assist with reviews associated with SR&ED tax incentive claims.
- What is SR&ED?
- Scientific or technological criteria for SR&ED eligibility
- Characteristics of a SR&ED project
What is SR&ED?
SR&ED is a government tax incentive program to support and motivate Canadian companies that conduct R&D in Canada. Some of the indicators of an eligible SR&ED project include:
- New application of existing technology
- Capital spends
- Budget overruns
- Developing or improving products and processes
- Technical issues
- Consulting studies
- Cost reduction strategies
- Environmental/regulatory compliance
- Integration of new technologies within old facilities
Scientific or technological criteria for SR&ED eligibility
Advancement
- New knowledge gained from the development of new or improved products or processes
- Small, incremental knowledge gains or improvements are eligible
- Both successful and unsuccessful projects are eligible
Uncertainty
- Technological problems resolved, leading to technological advancement
- Can often look like routine work but it is the context that matters. SR&ED occurs when you are moving beyond your existing knowledge base.
Content
- The project must be executed via a systematic investigation vs. “trial and error”
- Work must be supported by some form of evidence and performed by qualified people
Characteristics of a SR&ED project
Determining if a project is eligible for a SR&ED tax credit means showing a systematic investigation or search that’s carried out in a field of science or technology by means of experiment or analysis and that the work performed involves basic research, applied research or experimental development.
Establishing this involves answering the following five questions:
- Was there scientific or technological uncertainty?
- Did the effort involve formulating hypotheses specifically aimed at reducing or eliminating that uncertainty?
- Was the overall approach adopted consistent with a systematic investigation or search, including formulating and testing hypotheses by means of experiment or analysis?
- Was the overall approach undertaken for the purpose of achieving a scientific or a technological advancement?
- Did you keep a record of the hypothesis tested and the results as the work progressed?
An experienced team dedicated to meeting your needs
Our national team is made up of dedicated professionals who offer expertise from diverse disciplines, including many disciplines of engineering, science, mathematics, accounting and law. We also work closely with experts across PwC’s broader service offerings, giving you access to the best possible holistic advice.
Why PwC?
- No learning curve: With our deep understanding and practical experience that comes from advising some of Canada’s most innovative companies for over 30 years, we’ll get to work immediately on meeting your needs.
- We offer services that range from the full scope of SR&ED services, including claim strategy, claim review, claim preparation, tax return preparation, CRA review support and tax structuring to a review of your existing claims and systems.
- We can strategically position claims and tailor to your profile.
- We offer flexible fee options and competitive rates.
- Our team includes former Canada Revenue Agency (CRA) policy-makers and claim reviewers, allowing us to offer more informed and comprehensive CRA review support.
We help companies in all industries, including agriculture, biotechnology, engineering and manufacturing, IT and software development, mining, multimedia, oil and gas, pulp and paper, and many others. There are virtually no industries where we have not helped claimants prepare and support claims.
How we can help
Our goal is to help you secure the benefits from government incentives you are entitled to.
We’ll help you understand the tax credits, grants and other incentives that may be available to your organization and can assist with preparing the submissions and documents required to meet government requirements related to these programs. With our expertise, we can also help you put in place processes to meet compliance obligations associated with tax credits, grants and other incentives.
Whether you just want simple advice or whether you need a turnkey solution, we can offer the right services to suit your needs, including:
- Reviewing/revising your business processes to streamline the identification and tracking of eligible projects and costs
- Preparing the technical reports for SR&ED projects
- Identifying eligible SR&ED costs by project
- Assisting with claim support during a CRA review
- Training your finance and engineering department staff on the criteria and requirements of the SR&ED program
- Providing advice on where to establish your R&D centres
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Contact us
Partner, PwC Associates, National Leader, SR&ED and Incentives, PwC Canada
Tel: +1 604 806 7705
