a leader in sr&ed tax credits and government grants - irap vs sred … · irap vs. sr&ed...
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RDPAssociates,Canada’sLeadingSR&EDTaxPhone:(416)368-9341CreditandGovernmentGrantConsultancyEmail:[email protected]
Web: https://rdpassociates.com
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IRAPvs.SR&EDTaxCredits
Copyright © 2019RDPASSOCIATES
IRAPvs.SR&EDTaxCredits
SR&EDandIRAParebothfederalgovernmentprogramsthatofferfinancialincentivestobusinessesundertakingresearchanddevelopment(R&D)activitiesinCanada.Businessesthatareeligibleforoneprogramareofteneligiblefortheother.Totakeadvantageofbothopportunitiesit’simportanttounderstandthekeydifferencesbetweenthetwo.
Introto
RDPAssociates workswithbusinessesacrossawidearrayofsectorsandsupportstheaccesstovariousformsofGovernmentfunding.Weassistbothstart-upsandestablishedbusinesseswithgainingaccesstofinancialassistancefortheirinnovationandbusinessexpansionprojects.GovernmentfundingprogramsthatRDPspecializesinaretaxcreditsandbusinessgrants.
RDP isdistinctlydifferentfromitscompetitorsasithasitsownin-housetechnicalanalysts,whohavespecializationindifferentbusinessverticals.
ASSOCIATES
TheScientificResearch&ExperimentalDevelopment(SR&ED)TaxCreditisafederaltaxincentiveadministeredbytheCanadaRevenueAgency(CRA)since1986.ItspurposeistoencourageCanadianbusinessesofallsizesandinallsectorstoconductresearchanddevelopmentinCanada.
Fundingisprovidedasataxcredittoreducetheincometaxpayable.Insomeinstances,thecreditmaybefullyorpartiallyrefundable,resultinginacashreimbursement.
WhatisSR&ED?
WhatisIRAP?
TheIndustrialResearchAssistanceProgram(IRAP)isafundingmechanismadministeredbyCanada’sNationalResearchCouncil(NRC)since1962.Itoffersnon-repayablecontributionstoacceleratethegrowthofsmallandMedium-sizedbusinesses,withthegoalofstimulatingwealthcreationforCanadathroughinnovation.
Fundingisprovidedascashreimbursementsagainstclaimedprojectexpenses.
SR&ED IRAP
Costcoverage
15-35%ofeligibleexpenseswithadditionalprovincial/territorialcreditsmaybeavailabletostackupto42%(Ont.)totalcredit.
50%-80%ofeligibleexpenses
Maximumfunding Nolimit $10millionperproject
Numberofprojects Nolimit 1projectperyear
ProgrambudgetNolimit,givesoutapproximately$3billionannuallyonaverage
$157millionannually
FundingStatsIRAPVS.SR&EDTaxCredits
SR&ED IRAP
EligibleclaimantsBusinessofanysizeoperatinginCanada
For-profitbusinesswithfewerthan500full-timeequivalentstaffinCanada
EligiblecostsInternallabour,Canadiansubcontractors,materials,overheads
Internallabour,Canadiansubcontractors
Oddsofsuccess
SR&EDisanentitlementprogram– ifyourcompanycarriedouteligibleR&Dwork,andfiledyourclaimcorrectlywithpropersupportingdocumentation,youarelegallyentitledtoreceivethefunding.
Evenifyoumeetalloftheeligibilitycriteria,IRAPfundingisnotguaranteed.BusinessesmustcompeteforthelimitedpooloffundingbysubmittingastrongapplicationforaninnovativeprojectwhichpromisesmanybenefitstoCanada.
EligibilityIRAPVS.SR&EDTaxCredits
SR&ED IRAP
Availability Year-roundFirst-comefirst-serveduntilregionalbudgetisdepleted
Besttimetoapply WithyourcorporatetaxreturnNearstartofgovernmentfiscalyear(April1)
Deadlinetoapply18monthsaftertheendofyourfiscalyearinwhichtheR&Dexpenditureoccurred
Beforeyourprojectbegins
Processingtime 2-6months 1-3months
Timingofpayout InfulluponclaimapprovalMonthlyinstallmentsoverprojectduration
TimelineIRAPVS.SR&EDTaxCredits
ItispossibletoclaimbothSR&EDandIRAPtoincreaseyouroverallcostrecovery.AnyIRAPfundingreceivedmustbedeductedfromyourtotaleligibleexpendituresbeforecalculatingyourtaxcredit.However,notallprojectexpensesareeligibleforbothprograms.Certainactivitiesareentitledtodifferentcoveragerates.CarefullyallocatingyourcostsbetweenprogramscanminimizeoverlaptoreducetheimpactonyourSR&EDclaim.
ClaimIRAPagainst: ClaimSR&EDagainst:
• Duediligenceactivities(i.e.marketresearch,patentsearches,commercialdevelopment)
• Contractorcosts
• Overheads• Materials
Keeping rigorous project documentation is critical to show separation of these costs sothat your claims can be defended.
StackingIRAPVS.SR&EDTaxCredits
TaxCreditsandGrants
TotalEligibleSalary
Expenditure
SR&EDProxy
(overheads)
TotalIRAPFunding
TotalofTaxCredits
TotalofFundingandTaxCredits
%ofSpendRecovery
IRAPOnly $1,000,000 $150,000 $150,000 15%
SR&EDOnly $1,000,000 $550,000 $655,541* $655,541 65.5%
IRAP&SR&ED $1,000,000 $550,000 $150,000 $592,102 $742,102 74.2%
Although receiving both IRAP and SR&ED funding reduces the amount of tax credits earned, it increases the overall spend recovery.* Please note that the example above is based on eligible expenditures incurred in Ontario at the enhanced SR&ED federal ITC rate.
Below is an example of how funding could be calculated for a company who spent $1 million in labour costs on R&D and is eligible for a 44% tax credit rate. We have also assumed that the company receives $150,000 in IRAP funding. This is for illustrative purposes only, as IRAP funding may be more or less than $150,000 depending on project quality and funding availability.
StackingIRAPVS.SR&EDTaxCredits
Contactus
ThankYou!
ForacomplimentaryassessmentofyourSR&EDclaimsandyoureligibilityforSR&EDtaxcredits,contactusat:
[email protected]:(416)368-9341
Foracomplimentaryassessmentofyourgranteligibility,contactusat
[email protected]:(416)368-9341
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