SR&ED Explained: What Does this Tax Incentive Mean for Businesses?

SR&ED Explained: What does this tax incentive mean for businesses?

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The Scientific Research and Experimental Development (SR&ED) tax credit is a program the Canadian government offers that encourages businesses to conduct scientific and technological research. With the help of SR&ED, your business can reap the benefits of researching or developing new products in Canada.

However, programs like SR&ED can often be complex, confusing, and challenging. To help clarify this tax incentive, below is a general overview of the SR&ED program. It outlines what projects are eligible and explains how financing your SR&ED refund with Venbridge can significantly impact your company’s success.

What is SR&ED?

SR&ED is a tax incentive program administered by the Canada Revenue Agency (CRA). It is for businesses in Canada that perform basic scientific research, applied research, experimental development or support work. SR&ED is Canada’s most extensive research and development (R&D) program. For organizations to qualify for SR&ED, they must aim to create new or meaningful improvements to existing products, processes, principles, methodologies, or materials. From there, eligible claimants can recover some funds from their qualifying expenditures. Qualifying expenditures include:

  • Wages for employees directly involved in SR&ED-eligible work
  • Subcontractor costs for SR&ED-eligible work
  • Material costs required to achieve technological advancement

What are the SR&ED Eligibility Criteria?

For R&D projects to be considered eligible for SR&ED, their activities must meet the following requirements:

Technological Advancement

To meet this requirement, projects must generate information that advances understanding of underlying technologies. When new or improved materials, products or processes are made in a business context, it must represent a technological advancement. Simply put, the project’s work must attempt to enhance the technology base or level from where it was at the beginning of the project.

Technological Uncertainty

In addition, projects must address technological obstacles or uncertainties that cannot be overcome by applying current techniques, procedures or data available within the industry or field of work. This means that if a technique already accomplishes the task at hand, new processes for achieving the same goal would not qualify for SR&ED. 

Technical Content

Finally, claimants must provide proof that a systematic process was executed. This requires going from identification and articulation of the scientific or technological obstacles to hypothesis formulation, on to testing by experimentation or analysis, until finally reaching the statement of logical conclusions. For businesses, this requires that the objectives of the project’s work are clearly stated at the beginning of the project’s evolution and that the method of experimentation or analysis is clearly defined.

How Can SR&ED Tax Credits Help Your Business?

The SR&ED program rewards Canadian companies with an investment tax credit (ITC) at a basic rate of 15%. However, some corporations, such as Canadian-controlled private corporations (CCPCs), may claim an ITC with an enhanced rate of 35% up to $3 million. With these financial incentives, your company can fund innovative ventures, invest in future SR&ED-eligible projects, and give yourself a competitive advantage. SR&ED is an invaluable resource that can advance your company’s R&D capabilities and accelerate your growth. However, receiving your SR&ED refund can take as long as 18 months from when you first begin spending on eligible expenditures; this is where Venbridge’s SR&ED financing can help. 

SR&ED Financing Made Simple

When pursuing SR&ED financing, finding the right lender is essential. With an extensive portfolio of successes under our belts, Venbridge has assisted many companies in attaining the funds they need to continue their R&D projects. At Venbridge, we aim to empower SR&ED claimants to maximize their incentives and push their innovative projects forward by providing access to founder-friendly, non-dilutive capital. By partnering with Venbridge, you can begin funding your growth in as little as three business days!

Learn how partnering with Venbridge can enhance your R&D initiatives and assist your business through SR&ED financing by contacting our team today!

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