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Bdo Sr&Ed Presentation Silicon Halton March 23, 2010. Meetup 5.
 

Bdo Sr&Ed Presentation Silicon Halton March 23, 2010. Meetup 5.

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Getting funding: "What's in their wallet?!" Presented by: Frank Fiasche, Senior Manager, SR&ED, BDO Canada LLC

Getting funding: "What's in their wallet?!" Presented by: Frank Fiasche, Senior Manager, SR&ED, BDO Canada LLC

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    Bdo Sr&Ed Presentation Silicon Halton March 23, 2010. Meetup 5. Bdo Sr&Ed Presentation Silicon Halton March 23, 2010. Meetup 5. Presentation Transcript

    • The Tax Benefits of R&DSilicon HaltonMarch 23, 2010
    • Are you engaged in SR&ED, but not claiming the tax benefits you are entitled to?
      In this presentation …
      General program overview
      How to identify potential SR&ED activities
      Discuss types of activities that constitute SR&ED
      Which expenditures are eligible
      Tax treatment of SR&ED
    • SR&ED
      Scientific Research and Experimental Development
      “is the systematic investigation or search that is carried out in a field of science or technology by means of experiment or analysis”
      In 2008, over $4 billion was provided to over 22,000 companies
      Represents 33% federal R&D spending
    • Industries
      Manufacturing 29%
      Information Technology 24%
      Engineering 20%
      Natural Sciences 9%
      Electronics 9%
      Agriculture & Food Sciences 9%
      -------
      100%
    • Questions to ask to identify potential SR&ED activities?
      Has your company developed a new or changed product or process that has characteristics substantially different from those currently available (i.e. stronger, faster, lighter, more efficient, less expensive, more durable or flexible, etc.)?
      Has your company developed any prototypes? If you were to develop subsequent models, would they have new and different characteristics.
      Did you have any failures in product or process development or improvement?
      Have any of your products or processes cost more to develop than you expected?
      Have you used or combined technologies in new ways?
    • What activities qualify as SR&ED?
      SR&ED does not have to be carried out in a lab
      Basic or Applied Research
      SR&ED activities are often integrated with daily business activities
      Experiment Development is “work undertaken for the purposes of achieving technological advancement for the purposes of improving existing materials, devices, products or processes, including incremental improvements thereto”
      Activities carried out “directly in support” of qualified SR&ED activities can qualify
    • What activities qualify as SR&ED?
      All 3 of the following criteria must be met,
      Scientific or Technological:
      Advancement
      Uncertainty
      Content
    • Scientific or Technological Advancement
      Technologies utilized in a project
      By creating something or working towards something that is truly new
      Alternatives must be explored
      Successful outcome is not required, however an attempt must be made in order to achieve advancement
    • Scientific or Technological Uncertainty
      Must be an element of uncertainty
      Technological uncertainty arises when the solution to the problem is not obvious to people familiar with available knowledge and/or technologies for that industry
    • Scientific or Technological Content
      Research or development must be conducted in a systematic manner
      • From hypothesis formulation, through testing by experimentation or analysis, to logical conclusions
      • To reduce or eliminate the uncertainties
      Documentation must support work done
    • Certain activities are explicitly excluded from SR&ED, such as:
      market research
      sales promotion
      commercial production
      quality control or routine testing
      product style changes
      routine data collection
      human/social sciences research
    • Which expenditures are eligible?
      Labour Costs
      Salaries and wages
      Materials
      Consumed and/or Transformed
      Contractors
      “Arm’s length” consulting or fees
      Capital Expenses
      Purchased or leased
    • Tax Treatment of SR&ED
      An ITC (Investment Tax Credit) is the government provided assistance to companies that conduct SR&ED in Canada
      For most taxpayers, the Federal ITC rate is 20%
      CCPCs may qualify for enhanced Federal ITCs at 35%, depending on taxable income level in previous year
      Ontario also provides an ITC of 10%, rules for qualification are similar to federal rules
      In most cases the ITC is applied to reduce taxes payable for the year, however for CCPCs qualifying for the 35% ITC rate, the ITC in excess of taxes payable may be refunded to the corporation.
    • Tips for Successful SR&ED Claims
      Properly account for SR&ED expenditures:
      Identify all SR&ED activities
      Set up accounting systems to capture SR&ED expenditures separately
      Ensure that the system identifies any incremental “in support of” SR&ED activities
      Filing deadline is 18 months after the company’s fiscal year end
      Ideal to submit SR&ED with tax filing
    • Frank Fiasché, P.Eng.
      Senior Manager, SR&ED
      Advisory Services
      ffiasche@bdo.ca
      905.339.9113