ON THE SCIENTIFIC RESEARCH AND EXPERIMENTAL DEVELOPMENT (SR&ED) PROGRAM

Transcription

1 ON THE SCIENTIFIC RESEARCH AND EXPERIMENTAL DEVELOPMENT (SR&ED) PROGRAM BeneFACT Consulting Group

2 SR&ED PROGRAM Federal program run by Canada Revenue Agency (CRA) to encourage innovation General Definition of SR&ED work: A technical problem that causes skilled workers to undertake a scientific investigation in order to achieve a technical advancement

3 OBJECTIVES: TO EXPLAIN Why does the SR&ED program exist? Who does SR&ED apply to? What is SR&ED-eligible work? How does SR&ED apply to you?

4 SR&ED OVERVIEW Pronounced shred Billions disbursed per year In Ontario, up to 68 cents refunded for every dollar spent by eligible companies on eligible work

5 WHY DOES SR&ED EXIST? Encourage companies to take risks in developing new technology Increase Canada s competitive edge Thereby stimulate external investment in Canada The UK copied our SR&ED legislation!

6 WHO DOES SR&ED APPLY TO? Anyone interested in the cash flow of your company Companies doing eligible work (advancing technology in some way) Investors and funders

7 WHAT IS NOT SR&ED? Sales and Marketing Research in the Social Sciences or Humanities Aesthetic changes Routine data collection It is NOT the overall purpose of the activity or project, but rather what is actually occurring at a technical level * If a project has no technical uncertainty but only Economic/Financial uncertainty, it is not SR&ED eligible

8 WHAT IS SR&ED - TECHNICAL REQUIREMENTS Each project must demonstrate 3 criteria: Scientific or Technological Uncertainty Scientific or Technological Advancement Scientific or Technological Content (Systematic Investigation) *ALL 3 CRITERIA MUST BE MET

9 TECHNOLOGICAL UNCERTAINTY Whether or not a given result or objective can be achieved, and/or how to achieve it is not known or determined on the basis of generally available scientific knowledge or experience Criteria applies equally to work on new or existing processes or products Financial or economic risk is not an uncertainty

10 TECHNOLOGICAL UNCERTAINTY Obstacles in process/product development Not found in the public domain Key words: problems, barriers, unknowns, difficulties, limitations ~when things go wrong!

11 TECHNOLOGICAL ADVANCEMENT Activity generates information that advances your understanding of scientific relations or technologies Starts from a declared technological base of knowledge Applicable beyond the specific situation in which the discovery was made Brings new knowledge to claimant which had not been generally available to them in the base when project started

12 TECHNOLOGICAL ADVANCEMENT Result of the technical work Increases the technical knowledge Key words: innovation, evolution, achieving goals, new capabilities Learning to use new technologies is NOT eligible

13 TECHNICAL CONTENT The activity must incorporate a systematic investigation going from hypothesis formulation, through testing by experimentation or analysis, to the statement of logical conclusions. Includes work on the evolution of prototypes or models.

14 TECHNICAL CONTENT Work was actually. Er, performed! Qualified people did it Key words: testing, analysis, plant trials, pilot runs, laboratory experiments, investigation, engineering, prototypes~what technical people did NOT trial and error

15 SR&ED MODEL Problem Uncertainty Hypothesi s Prototype Success? Testing Y Content N Learn Advancement

16 SR&ED MODEL (CONT D) Advancement SR&ED Work Uncertainty or Challenge Knowledge Base

17 AREAS OF ELIGIBILITY New Product Development New Process Development Incremental improvement to existing products, materials, etc. Incremental improvement to existing processes

18 KEY CONSIDERATIONS It is NOT the overall purpose of the activity or project, but rather what is actually occurring at a technical level * If a project has no technical uncertainty but only Economic/Financial uncertainty, it is not SR&ED eligible

19 WILL YOUR WORK QUALIFY? You may be eligible if you: Tried to overcome one or more new and unexpected technological problems Conduct trials, experiments, or analysis to solve these problems Require experience or technologies not commonly available to your company to solve these problems Work will result in a tech. Advance in your industry or field (even if unsuccessful)

20 QUESTIONS TO ASK YOURSELF Is time being spent developing new ways of doing things? Is time being spent adapting processes before saleable products are being produced? Are you consistently producing different types of products requiring staff to always change the way they do things? Are significant amounts of scrap being generated?

21 QUESTIONS TO ASK YOURSELF Are production costs exceeding budgeted targets because you have to deal with unexpected production related problems? Has the company applied for or been approved for a patent?

22 WHAT TO TRACK? Hours, hours, hours!!!! Activities undertaken by technical staff Work performed Test results Material costs incurred on projects Subcontractor costs incurred on the projects Any capital items

23 DOCUMENTATION Important to identify and track projects as they happen Create separate project files/folders Existing job/time tracking system Pictures/video of scrapped materials, prototypes Technical notebooks s, meeting minutes, project notes Reports, models, prototypes, test results

24 WHAT WE NEED TO DO In order to Maximize the SR&ED tax credits Create a project structure identifying and tracking projects Document action plans, work, results, progress and conclusions Track time and link to specific projects

25 SUMMARY 3 Criteria: Uncertainty, Advancement, Content Projects with numerous challenges Gained knowledge applicable beyond project Remember the R&D model Identify projects upfront and track

26 BY THE WAY WHO IS BENEFACT, AND WHAT DO WE DO? In business for over 6 years 30-person firm serving all of Ontario Hundreds of claims filed per year in software, industrial manufacturing/automation, and life sciences

27 TELL ME AGAIN... WHAT IS SR&ED- ELIGIBLE WORK? Basic Research: work to advance scientific knowledge without a specific practical application Applied Research: work to advance scientific knowledge with a specific practical application in view Experimental Development: technological advancement to create or improve something (software, materials, devices, products, processes)

28 HOW DO I KNOW IF MY COMPANY IS DOING SR&ED WORK? Before the start of the project, what was your base knowledge level? What was the existing process before the introduction of your new process/product? What were the limitations or deficiencies of your existing process/product? Technological Obstacle Knowledge Base What was difficult or nonroutine about the work?

29 HOW DO I KNOW IF MY COMPANY IS DOING SR&ED WORK? Did you have a technical or technological obstacle (a problem!) Is/was there public domain knowledge to solve the problem? Could you think of different approaches to take in solving the problem? Systematic Investigation Knowledge Base Technological Obstacle Experiment & Analysis

30 REAL LIFE SR&ED EXAMPLES Developing a new cultivar Integrating AJAX and FLASH for a web-based molecular visualization application Solving performance problems of an existing client-server GIS application (increasing throughput or scalability) Find a novel way to more rapidly and painlessly administer a drug to livestock Modifying a feed screw to increase delivery volumes while maintaining product temperature/consistency

31 HOW DOES SR&ED WORK IN PRACTICE? You obtain your refund by submitting a claim Claim = Technical Report + form T661 and supporting documentation Supporting documentation? Yikes!

32 QUESTIONS?