Several changes to the SR&ED program proposed during the 2014 budget will be fully implemented in 2014. The changes that will be effective January 1, 2014 include:
Ottawa startup Gnowit is one of four Canadian companies that has been selected to attend the UK Trade & Investment’s second annual Global Adventure Competition which is effectively a trade, investment and mentorship mission. Gnowit’s technology skims through hundreds of newspapers, identifies what the core issues are, and provides article summaries that have been extracted. Its key features include the detection of sentiment associated with each article, and the removal of duplicate information.
Gnowit’s Chief Technology Officer Shahzad Khan is a graduate from the University of Cambridge, and chose to come to Ottawa in 2007 for two reasons: (1) Canada’s health programs, and (2) the tax environment was beneficial for startups due to generous government programs such as SRED and IRAP.
A new 2013 ruling for Immunovaccine Technologies Inc. v H.M.Q. (Tax Court Canada docket 2011-245ITG, 10-Apr-2013) found that Immunovaccine failed to subtract a $3.7 million loan received from ACOA from its SR&ED expenditures.
The CRA requires “government assistance” to be deducted from the SR&ED expenditure base; prior to this ruling, government assistance was found to be funds provided under terms more favourable than what a for-profit commercial lender would demand. As new direct funding sources are introduced by the government in the next few years, companies will have to balance the benefit of the new funding against the loss of SR&ED tax credits.
The 2012 Federal Budget announced administrative measures to improve the predictability of the SR&ED program, one of which was to investigate the feasibility of a SRED pre-approval service.
The proposed pre-approval service would be an option to claimants to help plan and budget for upcoming SR&ED projects. It has been proposed that claimants would be offered SR&ED advisory services, advice on preparing and submitting a SR&ED claim, faster processing of SR&ED tax claims, and a reduction of the effort to prepare a SR&ED claim.
As part of the feasibility study, the CRA is currently conducting an online questionnaire that can be completed prior to August 1, 2013. If you wish to contribute to the feasibility study, the online questionnaire is available from the CRA’s website.
For businesses with December 31st fiscal year ends, June 30th, 2013 is the absolute deadline for FY2011 SR&ED claims, and the fast-track deadline for FY2012 SR&ED claims. This means that if the FY2011 SR&ED claim is not filed by the end of this month, FY2011 expenses will be deemed ineligible for SR&ED tax credits.
Even if FY2011 has already been filed, it may be advantageous for businesses to consider filing their FY2012 SR&ED claim on time with their tax return. Refundable SR&ED claims that are complete and filed on time with the tax return are placed on a fast-track, and take an average of only 63 days to process, compared with an average of 146 days for those filed after the fast-track deadline. The current service standards from the CRA website are 120 days for a refundable SR&ED claim, and 365 days for a non-refundable SR&ED claim.
Administered by Canada Revenue Agency (CRA), the Scientific Research and Experimental Development (SR&ED or SRED) Program is a $3.5 billion business incentive program to encourage research and development in Canada.
This blog will serve to keep all Canadian small- and medium-sized enterprises (SMEs), small business owners and managers, and SR&ED practitioners up to date on the latest SRED news.
