Author: Bikram Johal, President of Banhall Consulting ltd.
You probably have been told that the SR&ED tax incentives are great for Canadian businesses. But what you really want to know is, “How much can I get back from my SR&ED claim?” Your competitors (24,000 Canadian individuals and businesses) are receiving SR&ED refunds, and so should you.
One advantage of SR&ED is that any company – from start-ups to established corporations – can receive a refund from the program. Depending on which province your business is in, you may be entitled to additional provincial tax credits. As a result, this can allow up to a total of 64% of eligible R&D expenses.
Calculating your refund
The amount you get back from your SR&ED claim is based on the amount you spend on your research and development for the year. Under this program, companies can claim up to 64% of employee salaries in BC and 33% for contractors. For example, last year you had an R&D project where three full-time employees combined for $150,000 in salary. By filing a successful SR&ED claim at 64% of their salaries, you would be entitled to a $96,000 cash refund. What could your business do with another two employees?
When filing a SR&ED claim, you can also claim up to 41.5% for materials, but it depends on how you used those materials. If your company uses materials, such as a machine, for commercial purposes, these cannot be claimed under SR&ED. However, if you worked on an R&D project where you used materials that were consumed, changed into another material, or were destroyed during the R&D process, these are claimable for SR&ED.
Keep in mind that if you are considering the SR&ED program, you will have to raise and spend the money for the R&D projects (including salaries and materials) first. After you file your SR&ED claim, it can take weeks or months before receiving your cash refund. Therefore, it is critical that you file your claim without any clerical errors or omissions. Mistakes can trigger audits by the CRA and take longer to process. Having an experienced professional reduces the risk of lengthy delays or audits.
Accurate, eligible, and complete SR&ED claims can be processed and approved, without audit, in weeks or even days.
Previous entry in the SR&ED blog series: What Activities are SR&ED Eligible?
Next entry in the SR&ED blog series: How do I Claim SR&ED?
About Banhall Consulting
Banhall Consulting LTD. was founded based on our passion for helping Canadian companies get the funding they need for their innovation to grow and thrive. Our dedication is helping companies with the SR&ED tax incentive program and how to navigate the complexities of the process and understand all necessary guidelines. Our team has decades of combined SR&ED experience and has worked on
thousands of SR&ED claims. Our financial and technical experts have the versatility to assist companies in various industries in all areas of their SR&ED claim. Combining this experience and knowledge with our detailed-oriented methods has allowed us to achieve proven results with a 96% success rate on SR&ED claims.
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