SR&ED PROGRAM
The Scientific Research and Experimental Development (SR&ED) program is a tax incentive program administered by the Canada Revenue Agency (CRA). The goal of the program is to encourage Canadian businesses to conduct research and development (R&D) and to strive for technological advancement within their given field.
SR&ED (commonly referred to as shred) is the largest source of federal government support for industrial R&D in Canada and is the model for similar programs in other countries.
The program is open to Canadian businesses of all sizes in all sectors. Most companies in tool and die, manufacturing, construction, software and IT, mining, food and beverage, chemicals and plastics, farming, dental, and pharmaceutical qualify for SR&ED tax credits.
In order to be eligible you must be developing a new product/process or improving an existing product/process and the work being done must match these key criteria:
Was there a scientific or a technological uncertainty—an uncertainty that could not be removed by standard practice?
Did the effort involve formulating hypotheses specifically aimed at reducing or eliminating that uncertainty?
Was the adopted procedure consistent with the total discipline of the scientific method, including formulating, testing, and modifying the hypotheses?
Did the process result in a scientific or a technological advancement?
Was a record of the hypotheses tested and the results kept as the work progressed?
In other words, you were presented with a problem that you didnt know (or were able to look up) exactly how to solve and in order to solve that problem you experimented with potential solutions. From this experimentation you were able to draw conclusions and carry that advancement in knowledge forward in your business.
Another key aspect to the program is that the success of the project is not a factor in determining eligibility. Even if your project fails it is still eligible for the program as long as it meets the criteria listed above.
The amount of money that can be recovered depends on several factors. These factors are:
1) If the company is Canadian owned
2) Operates within Canada
3) Taxable income from previous year
4) Privately owned or public
5) Province in which you operate
The SR&ED tax incentive program is not a grant. It is filed as part of your corporate taxes at the end of your fiscal year and can be claimed annually. The deadline for claim submission for any given year is 18 months after your fiscal year end.