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The Scientific Research and Experimental Development (SR&ED) program is a valuable government initiative aimed at encouraging businesses to invest in research and development (R&D) activities across Canada. SR&ED provides companies with tax credits to offset some of the costs associated with research and development. To successfully claim SR&ED credits, ensuring your project falls within the eligibility criteria of the program is essential.
Below, we’ll take a closer look at some of the key criteria to be aware of prior to filing a SR&ED claim – read on to learn more.
Eligible R&D Activities
In order for expenditures to be eligible under the parameters of the SR&ED program, filers must ensure that their projects meet the following criteria:
Advancement of Knowledge
To fall within SR&ED guidelines, your project must aim to achieve scientific or technological advancement. In other words, the core objective of your work must either enhance existing products, processes, or materials or develop new resources to be used for specific applications.
Systematic Investigation
Your R&D activities must be systematic, with a clear plan and well-defined hypothesis that informs your method and approach. Projects that cannot provide sufficient proof of a structured approach may not be successful in their filing.
Technological Uncertainty
Your project should address technological uncertainties, or in other words, technical issues that do not yet have a readily available solution or point of standardized understanding. You must be able to demonstrate the existence of technological uncertainties at the outset of your project and explain how your R&D activities were conducted to overcome (or attempt to overcome) these uncertainties.
Experimental Development
Experimental development refers to work undertaken to create new or improve upon existing materials, devices, products, or processes, involving experimentation and analysis to resolve technological uncertainties and achieve scientific/technological advancement. If you can prove that the expenditures were part of the experimental development of the items listed above, you’ll find success when claiming them.
Scientific or Technical Content
To qualify for SR&ED credits, your project must have scientific or technical content, meaning that you will need to clearly demonstrate the application of scientific or engineering principles and methodologies in your R&D activities. It is also worth noting that not all technical work qualifies for SR&ED; standard engineering or development activities that do not involve resolving technological uncertainties or advancing scientific knowledge are not eligible.
Advancement and Documentation
In order to meet the criteria for SR&ED, you must be able to demonstrate how your project results in scientific or technological advancement. You can do this by keeping contemporaneous documentation of your projects. Proper documentation is integral to any successful claim and should include key factors like before-and-after comparisons, technical reports, prototypes, or other tangible evidence of improvement achieved through your work.
Finance Your Refundable Tax Credits with Easly
Claiming SR&ED credits in Canada can provide a significant financial boost for businesses engaged in research and development when the claim is successful and results in a refund. To maximize the benefits of this program, it’s crucial to understand and meet the criteria set by the CRA and to have a long-term financial liquidity plan that allows you to access funds when it matters most. The annual refund cadence of the SR&ED program makes it crucial to consider how you’ll manage cash flow in the interim.
SR&ED financing with Easly is a strategic form of non-dilutive capital with no personal guarantee required. At Easly, we ensure you’re able to get your funding fast, with our underwriting team constantly reviewing applications and ensuring that approved clients receive their capital in as little as two weeks.
Learn more about the role SR&ED tax credit financing can play in your company’s growth by contacting Easly today.
