Written by Chris Pinter Tweet
The Canadian Government has recently changed the rules for all technology companies who rely on the Scientific Research and Development ( SR&ED ) tax credit.
The changes that are taking place affect claims as the reviews towards what qualifies for a claim are much more rigorous than in the past and the focus on approved claims is towards pure research rather than research that lead towards a marketable product.
The SR&ED is a Canadian Federal government program intended to assist those companies who conduct research to improve the technological expertise of their companies. One of the biggest benefits of the SR&ED program is the fact that pre-revenue companies can receive cash from the government for the up to 68 cents for each dollar that is spent on research.
The Canadian Advanced Technology Alliance (CATA Alliance), who is the voice of the Canadian high tech community, released an alert in regards to the changes that are created by the Conservative government.
The report outlines two changes that SR&ED has made towards filing claims including “The Claim review Manual for Research and Technology Advisors” as well as a guide that outlines the claim review process. The CATA Alliance alert points out that “…the documentation standards being used are much more likely to be supportable in dedicated research environments, and that the eligibility model is much more oriented to supporting the development of core or enabling technologies than it is to supporting work on advancing existing technologies. There is a much greater emphasis on claimants providing documented, contemporaneous evidence that they used a “five-stage” research process in order to prove to reviewers that a systematic investigation / search was followed.”
What this means is that technology companies cannot just do research to improve an existing product or process but must focus their attention on the core technology they are researching. Many high technology companies have found it hard to qualify their research for SR&ED claims in the past. Now it is even harder to justify the expenses since pure research that has no short term revenue is highly risky.
If you are unsure on how these changes will affect your business call the SR&ED office in your area to discuss your particular business. If you need more help please do not hesitate to contact Pinter Electronics Consultants for assistance with qualifying your research to the SR&ED tax credit.
Here is another article that we found on this topic if you want to read what other bloggers have to say about the SR&ED changes.