The Scientific Research and Experimental Development (SR&ED) program is a tax incentive offered by the Government of Canada that stimulates innovative efforts nationwide. Each year, the program provides billions of dollars in tax credit refunds to organizations of all types and capacities across numerous sectors, many of whom are small enterprises.
As beneficial as the program is for businesses, obtaining the credits is relatively complex. To qualify, you must submit a claim using tax Form T661 to the Canada Revenue Agency (CRA) of all eligible SR&ED expenses conducted within a fiscal year. Since these credits are paid in arrears, you will not receive the refund until after your claim is submitted. SR&ED is claimed after the fiscal year-end and can take months for the CRA to process. This means that you’ll be spending on eligible work and will be out-of-pocket until the CRA issues your refund. However, there is a strategy for accessing SR&ED funds sooner. Learn more about this three-step process to maximize your benefits.
1. Calculate Your SR&ED Refund Amount
Determining your total refund amount is fairly easy and can be completed in two steps. There are three costs to consider when claiming SR&ED expenses — salaries, materials, and contractor fees.
You also need to factor in the location of your headquarters, as many of the provinces and territories in Canada offer additional R&D credits beyond the federal SR&ED credit. Finally, you should add the total applicable amount you receive from the Industrial Research Assistance Program (IRAP), Canada Emergency Wage Subsidy (CEWS), and similar programs that reduce your claim.
If you need guidance figuring out your refund amount, consider utilizing Easly’s SR&ED refund calculator. This resource enables you to plug in the numbers and receive an estimated SR&ED refund value based on your province.
2. Calculate Your Potential Easly Cash Flow
After you acquire your estimated SR&ED refund amount, insert it into the Easly Cash Flow Calculator. This tool shows you how much of the expected refund your business can access in as little as two weeks through Easly Advances and can continue to access throughout the year as you accrue more credits
3. Apply for SR&ED Financing
As mentioned, the CRA extends SR&ED tax credits as reimbursements after companies submit their taxes at the end of the year. While it strives to review all accepted claims within a month and all refundable claims in approximately six months, businesses may not attain much-needed funding until long after expenses are incurred.
This is where Easly steps in. We accelerate the process of getting funds into the bank accounts of deserving Canadian organizations. We have an efficient review process that ensures businesses receive speedy approval. Once your company is approved, you will receive an Easly Advance of 75% of your accrued SR&ED credits. As you accrue more credits during the year, Easly can issue further advances, providing you with a consistent source of non-dilutive capital.
These advances are highly beneficial in supporting re-investment and streamlining cash flow. When you get SR&ED funds faster, you do not need to seek high-interest loans or sell equity to invest in pioneering work. Conversely, Easly Advances give you financing without requiring you to cede ownership of your business or accrue overwhelming debt. There are no upfront payments for Easly Advances. Reimbursement comes directly from the CRA refund. Once interest and fees are paid back, the remaining balance is transferred directly to your account.
Verify Your Eligibility
Before you begin plugging values into the SR&ED refund calculator and seeking financial assistance from Easly, you should confirm that your expenses are eligible for the tax incentive program.
Multiple organizations that operate in Canada qualify for SR&ED tax benefits, including Canadian-controlled private corporations (CCPCs), individual proprietorships, partnerships, trusts, and other corporations. Eligible work includes an organized investigation into a scientific or technological uncertainty that features a hypothesis, objective, and specific plan of action. It also needs a framework for analyzing and assessing the theory.
In general, qualified SR&ED work is basic research, applied research, or experimental development. It may also be activities that directly support one of these three categories, such as computer programming, data collection, design, engineering, mathematical analysis, or testing. See our guide on determining SR&ED eligibility in more detail.
Your research and development efforts do not need to be successful to qualify for SR&ED tax credits — they simply need to be completed to advance scientific or technological understanding.
Accelerate Your SR&ED Funding Timeline with Easly
With Easly, your company will not need to wait months to obtain SR&ED tax credit refunds. Although our financing cannot be the only source your business uses to drive pioneering work, it makes an excellent addition to your existing capital mix.
Get started today to learn more about accelerated SR&ED funding.