Scientific Research and Experimental Development (SR&ED)
The SR&ED program is a federal tax program designed to encourage Canadian businesses to conduct research and development (R&D) in Canada.
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Scientific Research and Experimental Development
What is SR&ED
The Scientific Research and Experimental Development (SR&ED) Program is a federal tax program designed to encourage Canadian businesses to conduct research and development (R&D) in Canada.
The SR&ED program provides businesses that conduct R&D with tax incentives to reduce their tax liability. Incentives come in the form of SR&ED expense deductions to reduce taxable income and as investment tax credits (ITCs) which can be as high as 35 percent of eligible R&D costs and refundable, even where no tax is owed.
Taxpayers carrying on a business in Canada are eligible for the SR&ED program. However, the tax incentive may differ depending on whether your business is structured as a sole proprietorship or a corporation. Additional advantages exist for Canadian-controlled private corporations.
What work qualifies for SR&ED?
Only some activities are eligible for the SR&ED program.
Eligible work includes:
- experimental development;
- applied research;
- basic research; and
- certain types of work in support of the above listed.
Often, these types of activities fall within fields such as engineering, design, operations research, mathematical analysis, computer programming, data collection, testing, and psychological research.
All costs related to these areas including the wages and salaries of employees directly engaged in the eligible R&D work, overhead expenditures, and materials can potentially be recovered through the SR&ED program.
Activities not eligible for the SR&ED program include:
- capital expenditures, market research or sales promotion;
- quality control or routine testing of materials, devices, products, or processes;
- research in the social sciences or humanities;
- commercial production of a new or improved material, device or product or the commercial use of a new or improved process;
- style changes;
- routine data collection; and
- prospecting, exploring or drilling for, or producing minerals, petroleum or natural gas.
How We Help
Because of its lucrative nature, the Canada Revenue Agency is especially vigilant in administering the SR&ED Program and quite often, valid claims are unjustly denied. Disputing with the CRA is complex and time-consuming and can be difficult for taxpayers. We help our clients fight for their SR&ED credits at both the CRA Objections stage and in Tax Court.
At the Objections stage, we help our clients draft and submit Notice(s) of Objection to fight denied SR&ED credits, prepare additional submissions to the CRA to substantiate their claims, and communicate with the CRA on their behalf until a decision is rendered.
If your dispute is not resolved at the Objections stage, the tax lawyers from our affiliate law firm; Farber Tax Law, can also help resolve your dispute in Tax Court. Their comprehensive service includes submitting arguments to the CRA/Department of Justice, conducting the necessary due diligence on your file, researching the relevant statutes and case law to support your position, analyzing all CRA audit reports to find discrepancies in your favour, and corresponding with the CRA/Department of Justice over the course of the tax dispute until a decision is rendered.
Working with our team gives our clients the best chance of success. For more information on a comprehensive approach to resolving your tax problems, contact us to schedule a free consultation.
Farber Tax Solutions can help you successfully deal with CRA problems. We utilize the experience of our tax experts to:
- 1| Offer a comprehensive solution that is focused on achieving the most favourable possible outcome for your tax issue;
- 2| Communicate with the CRA on your behalf and navigate the entire CRA dispute process; and
- 3| Offer a complete solution to your tax problems, including ex-CRA professionals and tax lawyers from Farber Tax Law.