How Canadian Agricultural Companies Can Use Both NRC IRAP and SR&ED

Published on: July 25, 2023

The agricultural industry is essential for Canada’s economy; in 2022, the ag sector represented 7% of Canada’s gross domestic product. To stay innovative, companies within this resilient industry need to invest in research and development (R&D) work. Since continuous agricultural development is critical for the Canadian economy, the government offers programs and tax incentives to support the industry’s R&D efforts.

Two programs that provide some of the most significant benefits to the ag sector are the Scientific Research and Experimental Development (SR&ED) tax incentive program and the National Research Council of Canada Industrial Research Assistance Program (NRC IRAP). Ag companies can strategically maximize their R&D funding by utilizing these programs. However, to attain the funds associated with these programs, you’ll need to understand how they work and how they may be used together. Below, Easly will walk you through NRC IRAP and how it can be utilized with your SR&ED tax credits. Continue reading to learn more about the advantages of using both NRC IRAP and SR&ED to fund your agricultural R&D work.

What is NRC IRAP?

NRC IRAP is Canada’s leading innovation assistance program for small and medium-sized businesses. For agricultural companies, this program encourages innovation and wealth generation within Canada by reducing the financial and technical risks associated with research and development.

In addition to grant funding, NRC IRAP provides businesses with comprehensive innovation services such as advisory services and connections to leading business and R&D experts. Agricultural companies seeking IRAP research grant funding for new or improved offerings may receive funding for between 60% – 80% of their eligible contractors’ costs and salaries. Moreover, IRAP can be used with other Government of Canada incentive programs, such as SR&ED, but more on these two programs below.

The Advantages of SR&ED and NRC IRAP for Agricultural Companies

While the Scientific Research and Experimental Development and IRAP programs support companies from diverse industries, it must be noted that while companies may utilize both SR&ED and IRAP, funding from one program may reduce the amount that can be accessed in the other. Any IRAP grants your business may receive must be deducted from your SR&ED claim. Moreover, if your ag company is applying for another government program, you must report your NRC IRAP grant. Nevertheless, with some strategic planning, your ag company can use SR&ED and IRAP to maximize your overall funding. Below are a few ways companies in the agricultural sector can take advantage of both programs.

Balance Project Expenditures

One of the most significant advantages of SR&ED and IRAP is that companies can use these grants and tax credits to cover subcontractor costs and full-time wages. While the NRC IRAP provides a higher reimbursement rate for projects with large payrolls or several services provided by subcontractors, your company’s remaining eligible expenditures associated with your project can be claimed under SR&ED. It’s also worth noting that certain expenses, such as employee overhead, are exempt from IRAP grants but are eligible under the SR&ED program.

Accelerate Innovation

To ensure a competitive edge in the agricultural sector, companies must continuously fund research and development. That means ag companies require adequate financial support for their projects without incurring egregious debt or surrendering equity. Another advantage of these programs is that SR&ED and NRC IRAP provide reliable funding sources that will not dilute equity or accrue costly interest fees.

Rapid Access to Consistent Capital

Finally, another benefit of utilizing NRC IRAP grants is attaining consistent reimbursement. Many agricultural companies deal with fluctuating cash-flow issues, making planning for new or current R&D projects challenging. IRAP grants are based on proposed expenses that, once approved, are reimbursed in a timely manner. However, in comparison, SR&ED tax credits are only processed at the end of an enterprise’s tax year, after they’ve spent on eligible work and may take up to 180 days for payment after putting forward a claim. Fortunately, your ag company can still tap into its SR&ED credits throughout the year with the assistance of an SR&ED refund financing company like Easly!

Ready to Learn More About SR&ED Tax Credit Financing?

Is your agricultural company tired of waiting for funds entitled to you by the SR&ED program? With Easly Advances your business can receive quarterly advances on your SR&ED refund. That means you can rest assured that your R&D projects will receive a predictable stream of capital when you need it most.