Are you looking to increase your investment in research and development (R&D) in 2023 and in search of growth capital to fund it? Canada’s Scientific Research and Experimental Development Program (SR&ED) is designed to make it easier for businesses to pursue innovation without the stress of dwindling capital. With the deadline to claim 18 months after fiscal year-end for corporations, knowing how to claim and having pristine documentation is essential to guarantee you maximize funding and receive it as soon as possible.
Partnering with an experienced consultancy specializing in SR&ED tax incentives is one of the best ways to ensure you maximize your return. Below, we’ll take a closer look at the ins and outs of SR&ED, the benefits of using a consultant to file your claim, and why Easly is one of Canada’s leading choices for non-dilutive financing. Read on to learn more!
What is SR&ED?
The Scientific Research and Experimental Development (SR&ED) program is a Canadian Government initiative targeted at businesses developing new and innovative technologies within the country. Since its inception, SR&ED has become the largest source of government-funded financial support for R&D. Participants receive tax credits for eligible expenditures that advance scientific or technological knowledge through experimentation and/or analysis. In 2021 alone, the SR&ED program saw a massive increase in its total disbursements, handing out over $4 Billion in tax incentives.
Who Qualifies for SR&ED?
Not all businesses in Canada qualify for the program’s tax credits. Eligible companies must spend on eligible R&D work conducted within the country. Eligible entities include:
- Canadian-controlled private corporations (CCPCs)
- Other corporations
- Individual proprietorships
Three main categories qualify for SR&ED:
Basic research: work undertaken to advance scientific knowledge without a specific application in view.
Applied research: research or development designed to increase industry knowledge with a specific practical application in view.
Experimental development: R&D designed to promote technology to create new or improve existing materials, devices, products or processes.
Those who fit within these guidelines can submit a claim annually and should note that receiving your refund can take quite some time, which is why many businesses choose to seek the help of a growth capital service provider like Easly.
DIY Or Guided SR&ED Filing
Claiming SR&ED can be a complicated process that requires precise documentation to ensure you maximize your refund and avoid a lengthy audit. While it is possible to apply on your own, there are several benefits to partnering with a skilled consultancy. Reasons to consider working with a professional include:
1. Requirements Often Change
As with many government policies and incentives, the SR&ED program is subject to routine changes, specifically when it comes to provincial credits, which can make it hard for businesses to keep up with new standards. Hiring a consultant gives you access to someone with dedicated knowledge, including the latest updates, so you can increase your financial gain and reduce headaches in the process.
2. Expertise You Can Trust
Experience is vital when it comes to claiming tax incentives. As mentioned above, a consultant will know the latest standards and what information to include in your claim to get the best results. A dedicated SR&ED tax consultant has the legal knowledge, program knowledge, and experience of navigating the many details associated with filing a claim.
3. Finessed Documentation
When applying for government grants or loans, ensuring your documentation is pristine isn’t negotiable.
Being subject to an audit can be extremely time-consuming and set your progress back months. A skilled SR&ED consultancy can guide you through what documentation is necessary efficiently and ensure you have proof to back up your claim.
4. Maximum Returns
A pernicious issue when it comes to DIY SR&ED claims is that you may miss certain details that would entitle you to more credits. While you may “save” by doing things in-house and eliminating the cost of an external firm, the reality is you may also miss out on significant capital overall. If you’re a first-time filer or have only ever self-filed, a consultant is a strong asset to have in your corner.
Growth Funding with Easly
As undeniably beneficial as the SR&ED program is, it is not without its shortcomings. The biggest hurdle for those seeking R&D support is that SR&ED refunds are only issued once per year and can take a significant amount of time to receive. For those who need a way to bridge the gap between expenditure and refund, financing your SR&ED credits with a Capital-as-a-Service (CaaS) firm, like Easly, is a great way to receive capital fast and bring balance to your capital stack.
Easly offers reliable, non-dilutive capital at a low cost and in a founder-friendly manner that is cash flow positive and does not require personal guarantees. Once approved by our skilled team of underwriters, you can receive your capital in as little as 48 hours, allowing you to get the support you need with minimal slowdowns or interruptions to your operations.
To learn more about the role of SR&ED refund financing in your company’s capital stack, contact Easly today!