The Knowledge Required for a Successful SR&ED Application...
A chief component of our mandate at the Knowledge Management Institute of Canada is to support innovation in Canada - Introducing the Scientific Research and Experimental Development Fund...with a unique twist!
"Innovation is a Natural Outcome from the Intentional Effort to Continuously Advance Knowledge"
It is well documented in a number of government reports, Canadian corporations are lagging behind other industrialized nations in terms of their investment in and capacity for innovation "Canadian corporations rank 14th out of the 17 top industrial nations in terms of their capacity to innovate” (Federal Government review into why Canada is lagging behind in innovation).
The reasons for this are many, but here are some of the most cited:
- Our geographical size and small population
- Our reliance on national resources to drive economic growth
- Our belief that investment in research and development is the responsibility of Government
- The structure, mandate and granting requirements of many Government funding and granting agencies
Having worked with a good number of Government granting agencies, we have been continually frustrated with what we consider to be mandates which are too broad and don't provide funding for what companies really need in order to invest in R & D ahead of revenue. The one exception is the Scientific Research and Experimental Development Fund (SR&ED) run by the Canada Revenue Agency.
The SR&ED program is a tax incentive offered by the Canadian federal government to encourage and support Canadian innovation. Several provinces offer similar programs. Simply put, successful filing of eligible SR&ED claims means more money for your business. The SR&ED has been around for many years, but still remains relatively unknown to smaller organizations. SR&ED application filing is a service offered by most of the large financial consulting firms.
The significant tax benefits of the SR&ED program include:
- Income tax incentives in the form of a federal investment tax credit (ITC) of 15% or 35%, which in some cases can be fully refundable
- Full income deductions for eligible expenditures (both current and capital)
- No restrictions on carrying forward SR&ED expenses
ITC (Input Tax Credits) rates will vary depending on ownership and the size of the business but can be earned on salaries, contracts, materials and capital. For small Canadian-Controlled Private Corporations a 35% ITC is available, while other Corporations can earn a 15% non-refundable federal ITC. The SR&ED program also permits claimants to increase their wage component by as much as 55% to account for overhead costs (see table below).
|SR&ED Refund ability Rates||Investment Tax Credit Rate||Refundable Rate|
|Canadian-controlled private corporation (CCPC)|
|Qualifying CCPC – Taxable income of previous year less than or equal to the Reduced Small Business Limit: *|
|Up to $3 million in expenditures **||35%||100%|
|Non-qualifying CCPC – Taxable income of previous year less than $500,000 over Reduced Small Business Limit: *|
|Expenditures below the expenditure limit **||35%||100%|
|Expenditures over the expenditure limit||15%||-|
|Proprietorships, partnerships and trusts||15%||40%|
The Knowledge Advantage
Up to this point, blue chip global accounting firms have provided excellent support for SR&ED applications, however as the critical knowledge required to improve the chances of success is weighted more heavily on the technical side than on the accounting side, we believe we offer a number of distinct, value based advantages:
Expertise and Experience & Track Record of Success
The Institute is pleased to announce the addition of Mark Krebs and Brian Leve (see bios) to our team. Collectively Mark and Brian have filed more successful SR&ED applications than perhaps anyone else in Canada. Their unique combination of deep technical, accounting and legal knowledge and expertise means they are able to quickly determine your project's eligibility for the program and work seamlessly with your technical team and program managers to gather the necessary information to ensure a quick turnaround of your application.
Improving Your Capacity for Innovation....The Knowledge Xchange
Here's the twist...While helping you recoup your investment in R & D, we also help you to improve your organization's capacity for innovation through the deployment of our Knowledge Xchange collaborative system to assist with the development of the SR&D application and your research and development project.
Learning While Doing
Once we've pre-qualified your project's eligibility for SR&ED, we provide you with access to a web-based collaborative, content management system - The Knowledge Xchange creates a "window to the workshop" between your project team and ours. The system is designed so that it is easy for your team to submit all the information and documentation required to support the grant, while you are engaged in your R&D program - by the time your project is completed, so is the grant application. More than that, the system captures "how" your team collaborates throughout the development cycle - the technical challenges and constraints you face and how your team handles these (all important criteria for SR&ED).
Having both content and context in one place gives your organization valuable insight into team dynamics, who your key contributors and influencers are, the effectiveness of your project management processes, while at the same time improving communication, capturing critical knowledge and building reference able institutional memory to help you avoid redundancy and the repetition of past mistakes.
At the conclusion of your R&D project, we will provide you with a number of Analytic Reports which will give you the necessary knowledge and insights to continually improve what you do and how you do it, recognize top contributors and performers, and build institutional memory. You will have the ability to download all data, information and knowledge* from the system following the conclusion of the project or you may continue to use the system for a small monthly hosting and support fee.
Success Based Pricing Model
Before we undertake an engagement with your organization, we will ask you to complete a pre-qualification questionnaire. If your project qualifies for SR&ED the next step is to have an initial onsite or virtual consultation with members of your senior management and project management team.
We charge an initial consultation fee to meet with your project team, explain the program requirements, outline the process and information we will require to move forward with the initiative. This fee also includes the set-up and configuration of the Project Knowledge Xchange should you decide to engage our services.
Note: The initial consultation fee will be deducted from our final invoice should we be successful in re-cooping any portion of your R&D investment
How We Get Paid
The best thing about the SR&ED program is we only get paid if we are successful in helping you re-coup some of your investment. It's like "manna from heaven" says Blake Melnick, our Chief Knowledge Officer, who realized the benefits of the SR&ED Program back in 2005 when the Company he worked for received an unexpected refund of approximately 2 million dollars from a 4.5 million dollar R&D investment.
We will be hosting a series of educational webinars in the up coming months on the SR&ED program. In the meantime, if you require additional information or have questions regarding the program, please email us at firstname.lastname@example.org
You can complete and submit the pre-qualifier questionnaire by on website by clicking HERE (NTD - we will use the questionnaire to collect company info, key contact person along with a description of the project)
* As a research organization, dedicated to improving the practice of knowledge management, we reserve the right to use customer data contained within our systems, for the purpose of research only. All identifiers will be removed and confidential information will not be divulged without written authorization.