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

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

  1. 1.
  2. 2. The Tax Benefits of R&DSilicon HaltonMarch 23, 2010<br />
  3. 3. Are you engaged in SR&ED, but not claiming the tax benefits you are entitled to?<br />In this presentation …<br />General program overview<br />How to identify potential SR&ED activities <br />Discuss types of activities that constitute SR&ED<br />Which expenditures are eligible<br />Tax treatment of SR&ED<br />
  4. 4. SR&ED<br />Scientific Research and Experimental Development<br />“is the systematic investigation or search that is carried out in a field of science or technology by means of experiment or analysis”<br />In 2008, over $4 billion was provided to over 22,000 companies<br />Represents 33% federal R&D spending<br />
  5. 5. Industries<br />Manufacturing 29%<br />Information Technology 24%<br />Engineering 20%<br />Natural Sciences 9%<br />Electronics 9%<br />Agriculture & Food Sciences 9%<br /> -------<br /> 100%<br />
  6. 6. Questions to ask to identify potential SR&ED activities?<br />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.)?<br />Has your company developed any prototypes? If you were to develop subsequent models, would they have new and different characteristics.<br />Did you have any failures in product or process development or improvement?<br />Have any of your products or processes cost more to develop than you expected?<br />Have you used or combined technologies in new ways?<br />
  7. 7. What activities qualify as SR&ED?<br />SR&ED does not have to be carried out in a lab<br />Basic or Applied Research<br />SR&ED activities are often integrated with daily business activities<br />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”<br />Activities carried out “directly in support” of qualified SR&ED activities can qualify<br />
  8. 8. What activities qualify as SR&ED?<br />All 3 of the following criteria must be met,<br />Scientific or Technological:<br />Advancement<br />Uncertainty<br />Content<br />
  9. 9. Scientific or Technological Advancement<br />Technologies utilized in a project<br />By creating something or working towards something that is truly new<br />Alternatives must be explored<br />Successful outcome is not required, however an attempt must be made in order to achieve advancement<br />
  10. 10. Scientific or Technological Uncertainty<br />Must be an element of uncertainty<br />Technological uncertainty arises when the solution to the problem is not obvious to people familiar with available knowledge and/or technologies for that industry<br />
  11. 11. Scientific or Technological Content<br />Research or development must be conducted in a systematic manner<br /><ul><li>From hypothesis formulation, through testing by experimentation or analysis, to logical conclusions
  12. 12. To reduce or eliminate the uncertainties</li></ul>Documentation must support work done<br />
  13. 13. Certain activities are explicitly excluded from SR&ED, such as:<br />market research<br />sales promotion<br />commercial production<br />quality control or routine testing<br />product style changes<br />routine data collection<br />human/social sciences research<br />
  14. 14. Which expenditures are eligible?<br />Labour Costs<br />Salaries and wages<br />Materials<br />Consumed and/or Transformed<br />Contractors<br />“Arm’s length” consulting or fees<br />Capital Expenses<br />Purchased or leased<br />
  15. 15. Tax Treatment of SR&ED<br />An ITC (Investment Tax Credit) is the government provided assistance to companies that conduct SR&ED in Canada<br />For most taxpayers, the Federal ITC rate is 20%<br />CCPCs may qualify for enhanced Federal ITCs at 35%, depending on taxable income level in previous year<br />Ontario also provides an ITC of 10%, rules for qualification are similar to federal rules<br />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.<br />
  16. 16. Tips for Successful SR&ED Claims<br />Properly account for SR&ED expenditures:<br />Identify all SR&ED activities<br />Set up accounting systems to capture SR&ED expenditures separately<br />Ensure that the system identifies any incremental “in support of” SR&ED activities<br />Filing deadline is 18 months after the company’s fiscal year end<br />Ideal to submit SR&ED with tax filing<br />
  17. 17. Frank Fiasché, P.Eng.<br />Senior Manager, SR&ED<br />Advisory Services<br /><br />905.339.9113<br />