There’s no question that Canadians recognize the importance of innovation; it’s why we’ve gone to such great lengths to be on the forefront in this area. But do you have to be a James Gosling, Sandford Fleming or Mark Tilden to be recognized for you efforts? The acclaim received for these kinds of accomplishments may be highly coveted, but how does one get to the point where they realize their stroke of genius amidst all the iterations and failed attempts? The answer may include things like perseverance, determination, and a strong vision; and while these are pillars in any innovators journey, not having the capital to persist may be the only limiting factor. For this reason, one thing that all individuals who operate is the area of innovation should know is where to get the money to ensure their journey is steadfast and your goals are realized. There are many options when it comes to finding capital; but it always comes at a price. Perhaps in the form of shared equity, or high interest rates. So let’s look at one example that doesn’t involve either…
For decades the Canadian Government has done their part to foster innovation here at home by rewarding companies who have attempted to be innovative through the Scientific Research and Experimental Development Program (SR&ED). This incentive program pays out nearly $4 Billion every year to companies that are likely no different than yours. From sole-proprietors to privately held corporations and publicly-traded companies, there is an opportunity for any company operating in Canada to file an SR&ED submission for the innovative work they’ve done. (The only exception to this is non-taxable companies like non-profits and charities).
OK, you’ve got my attention. So what if I do make an SR&ED submission? Then what?
Good question. Well, if you’ve met CRA’s requirements, as approximately 20,000 companies do each year, you’ll find that a considerable portion of the expenditures related to innovation will be refunded. And, ready for it… If you’re a privately held company with a small business status, this is cash refund from CRA.
So, how much are we talking?
Another good questions. Eligible companies are legally entitled to receive a refund of as much as nearly 70% of their dedicated payroll, nearly 35% of related invoices from sub-contractors and nearly 45% of the value of any wasted or transformed materials that went into the innovative efforts in the case of manufacturing.
You keep saying “Innovative”. Don’t say anything, but I’m not sure I really know what that means. So, how do I know if my company should make an SR&ED submission?
When it comes to the SR&ED program, there are only 3 criteria that determine one’s eligibility.
1. Technological Uncertainty
2. Technical Content
3. Technological Advancement
Feel free to interpret it this way.
1. You’re trying to achieve a commercial initiative and somewhere along the way you realize, we don’t have the technological knowledge-base to overcome a problem you’re presented with. Beyond this, you can’t find out the answer either; it’s either unknown, or no one is willing to share it with you.
2. Through a systematic approach including various iterations and other forms of experimentation, you try to reduce or eliminate that technological uncertainty.
3. Whether your commercial objective is achieved, or not, you learned something through your systematic approach, which in the context of the SR&ED program constitutes a technological advancement. Remember this, the resultant knowledge that is generated through a systematic investigation is considered technological advancement.
Let me get this straight… you’re telling me that that my company is entitled to a cash refund, because we encountered a technological problem during a commercial project that we tried to overcome, which resulted in us expanding our knowledge-base in that area of technology through our “R&D” efforts.
Yes!!
How come no one told me about this before!?
Don’t shoot the messenger, because they’re the one that can put you in contact with the think.COLLECTIVE
