helping you obtain sr&ed benefits william stark, ca resdev tax consultants inc. [email protected]...
TRANSCRIPT
Helping you obtain SR&ED benefits
William Stark, CAResDev Tax Consultants Inc.
© 2
004
Res
Dev
Tax
Con
sulta
nts
Inc.
All
right
s re
serv
ed.
2
Agenda
• About the SR&ED program• What Is SR&ED?• Experimental Development• Systematic Investigation• Documentation
– Activities– Expenses
• Questions
3
About the SR&ED Program
• Largest Incentive program and administered by CCRA• Purpose – to encourage research and development in
Canada that will lead to new or improved technologically advanced products or processes
• Used by over 11,000 companies annually• Achieved by ~ $1.6 billion/year in tax credits, with no cap• Started in 1984, with unfavourable results (i.e. - 1994)• Today – Ottawa is trying to increase the program’s
exposure and usage to $2.5 billion/year• Reflected by – T661 change and new business plan
4
What is SR&ED?
• SR – Scientific Research– Purpose – to obtain an “advancement in scientific knowledge”
which encompasses Basic and Applied category under ITA 248 (1)– “work done predominately in a laboratory”– Your “cure for cancer” work– Accounts for less than 10% of the claims submitted
• ED – Experimental Development– Purpose – to obtain a “technological advancement”– “work done both in and outside the laboratory”– Work done with a commercial focus in commercial setting– Accounts for the other 90% of the claims
5
Experimental Development - Defined
• Experimental Development is– Attempt to achieve– Technological advancement– For the purpose of new or improving existing– Materials, devices, products or processes– Includes incremental improvements– Follows a systematic investigation– Occurs in a commercial setting– Includes Support work
• Experimental Development is not– Trial and error testing where the success is a foregone conclusion
6
Technological Advancement
• An increase in the technology base of the claimant from the beginning to the end of the project
• How did the knowledge or know-how of the claimant increase/what did he learn
• Success/failure are irrelevant – work done is criteria• Consider existing technology base
– Existing technology in the company (what they have done in past)– Information available in the public domain
• Restrictions– Advancement must be in business context of claimant– Must follow systematic approach/search by experiment
7
Systematic Approach
• Work is carried out or led by trained personnel• The work follows an approach of
– Business objective– Hypothesis/Conceptualization– Approach/Drawings– Build, Test and Analysis– Results
• The process by which the work is performed and the work itself - must be documented
8
BUSINESSOBJECTIVE
TECHNOLOGICALOBJECTIVES areDEFINED- What do we want to achieve
- Existing base (what do we know)
- What are the problems we will encounter
- How to deal with problems
WORK/ACTIVITIES UNDERTAKEN
TECHNOLOGICALOBJECTIVE isRESOLVEDAddressed
by
Stage / Phase
Conceptualization / Planning Experimentation / Analysis Results
Systematic Approach/Documentation
Start of SR&ED End of SR&EDStart of R&D
9
Documentation - Activities
• Chronological Events– Feasibility– Design– Implementation– Deployment
• Challenges and Solutions• Supporting Documentation, examples
– Bug tracking– Design docs– Meeting notes– Etc.
10
Documentation Wages – most significant component
• T4 salary preferred due to proxy• Owners – must be T4• Documentation requirements:
– T4 salary– Technical qualifications– Start / finish date– Time and Description of SR&ED activity (all possible projects)
• Initial conceptualization
• Experimentation – design/coding/testing
11
Documentation - Subcontract (Non T4 staff)
• Work must be physically done in Canada• Subcontractor must be a taxable supplier in Canada• Who can claim - Who owns the IP• Includes support activities• Documentation requirements:
– Invoice from contractor• Description of activities – design work• Date and amount
– Contract• cost + basis• Description of SR&ED activities
– Technical qualifications of subcontractor
12
Documentation - Materials
• Materials things that are either consumed or transformed• Consumed – destroyed, such as scrap after a test run• Transformed – incorporated into the new product/process
– Example – object code that is incorporated into new software
• No restrictions – can buy from anywhere• Straight purchase “off the shelf” item – if it includes
development then it is subcontracting• Documentation requirements:
– Invoice – with brief description of what was purchased– Relation of how the material was incorporated