Incentives: SR&ED & other government programs - Ken Bell


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Ken Bell presents to Fraser Valley Chartered Accountant Association on Oct 3rd, 2012

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Incentives: SR&ED & other government programs - Ken Bell

  1. 1. INCENTIVES:SR&ED AND OTHERGOVERNMENT PROGRAMS Ken Bell PEng, PE (Wash), FEC Incentive Access Group Corp.
  2. 2. Outline• Funding For Innovation• Direct v. Indirect Support• Canadian R&D Landscape (Jenkins Report)• Rebuttal (MacIntosh)• Budget 2012• Ken’s Top Five Picks
  3. 3. Direct Support• Defined Program Objectives• Unique Application Form• ‘Peer’ Review – meet objectives?• Fixed Budget each FY• Inherent Regional or Sector Bias• Start-Up Advice: Don’t Bend Your Business Plan Just To Get Funding
  4. 4. Dubious claims diminish R&D tax creditBARRIE McKENNA, OTTAWA - Sunday, Feb. 06 2011It’s Canada’s marquee innovation program. And it’s broken.
  5. 5. Business Spending on R&D• One-third Canadian R&D $$ - 25 firms• One-half - 75 firms• Most small businesses – no R&D• Small R&D performers – 40% of revenue• Large R&D performers – 1-2% of revenue
  6. 6. Government Spending on R&D
  7. 7. Support Dimensions 2010-2011 1.3 (2007) $2B large(2007) 1,100 4,000 claims 0.98IRAP grants 3.53 $1.3B small 20,000 claims 0.63
  8. 8. Program Costs 2010-2011 1.3 $60M$140M 0.98 3.53 0.63
  9. 9. “A Bewildering Array”
  10. 10. Jenkins Findings• Many tiny direct programs• Unknown to business• No way to measure effect – direct/indirect• Lots of startups, few big winners (2%)• Foreigners buy those few winners• Lack of venture capital?
  11. 11. Jenkins Recommendations• Nation: Make little guys bigger• Create National Innovation Ministry• Cut everything but labor from SR&ED• Divert savings to ‘direct’ programs• Government procurement from SMEs• More risk capital• Re-focus NRC’s mission
  12. 12. MacIntosh on Jenkins• Salaries-only benefits talent firms (software)• 2% Success Rate is GOOD Silicon Valley 4% - much greater funding Firms may license tech Firms may plan sell to exit• DIRECT: bureaucracy, bias, incompetence• INDIRECT: market discipline, way out of VOD• Sponsored Venture Funds a Boondoggle
  13. 13. Economic Action Plan 2012• $400M large-scale venture capital funds• $100M to BDC venture capital• $110M to NRC to double IRAP• $95M Canadian Innovation Commercialization Program• $14M high-quality researchers to industry (MITACS)• Western Innovation Program• $500M to CFI• Streamline SR&ED program
  14. 14. Big Changes? 2010-2011 2012-2013 1.3 1.43 3.10.98 3.53 1.07 0.63 0.69
  15. 15. SR&ED Changes• Lower ITC rate (20%  15%)• Still 35% for small CCPCs• Decrease in overhead proxy (65%  60%  55%)• Equipment excluded c. 2014• 80% of contract payments• $6M (CRA) to ‘enhance’ delivery• Review of provider fees
  16. 16. Typical Impacts• Small Software CCPC (salaries) ↓6.1%• Small Software CCPC (contracts) ↓20%• Large Software CCPC (salaries) ↓21%• Large Software CCPC (contracts) ↓32.8%* includes provincial top-ups
  17. 17. Program Costs$140M $66M 1.43 3.1 1.07 0.69
  18. 18. Ken’s Top Five Innovation Programs• SR&ED• CICP• NRC-IRAP• MITACS• NSERC
  19. 19. Scientific Research &Experimental Development Tax Credit• Still the biggest game in town• Company directs research as needed• No delay for approvals• Plan and document• Reasonably fast processing• Use qualified third-party advisor• No regional or sector bias
  20. 20. Canadian Innovation Commercialization Program• NEW: $95M• Public Works now test-bed for pre-commercial innovations• Supplement to MERX• Register firm, register new product• Evaluation criteria•
  21. 21. Industrial Research Assistance Plan• Additional $110M to double NRC support• Identify R&D project• Portion of salary and contractor costs• Vetted by NRC• Funds allotted per FY, apply early• Track record $10K, $50K, $150K, $500K• SR&ED remaining portion to 75%
  22. 22. MITACS• $14M over 2 years to double the program• Grad students and post-docs to industry• All industry sectors and disciplines• Apply any time, vetted within 4-6 weeks• $15,000 for each 4 months, $7,500 from industry gets matching contribution• Your time eligible for SR&ED
  23. 23. Natural Sciences and Engineering Research Council (NSERC)• Various funds• Hire a professor, specific R&D problem• Three forms, at any time• Vetted, decisions 4-6 weeks• $25K grant for $50K project• Company must match in-kind• SR&ED for related expenses
  24. 24. Ken’s Top Five Innovation Programs• SR&ED• CICP• NRC-IRAP• MITACS• NSERC
  25. 25. QUESTIONS 604 572 9548 x 320 Ken Bell PEng, PE (Wash), FEC Incentive Access Group Corp.