August 7th, 2014
Are You Sure You’re Getting the Money You Deserve? In our last post, we highlighted some of the common misconceptions that are preventing Canadian firms from taking full advantage of some of the richest R&D incentives in the world, available under the Scientific Research and Experimental Development (SR&ED) tax credit program. We still have several more common misconceptions to cover. Here it goes:
“I’m an engineer. It’s my job to solve the problems. How can this be SR&ED?” Engineers, technologists, designers and programmers are highly educated, competent and proud professionals. Every day they tackle technical challenges and obstacles associated with their products and processes. Sometimes, these obstacles can be overcome using known techniques, solutions, and standard industry practices and knowledge. At the end of the technical problem solving process, although they may have resolved the obstacles and challenges, they haven’t added to the body of knowledge and capabilities related to the technology in question – they haven’t “advanced” technology. When the availability of knowledge and capabilities, both within the company and within the readily available external technology and industry environment, isn’t sufficient to overcome technical challenges and obstacles, we have what is called a technological knowledge gap. When a systematic process is undertaken to address the knowledge gap, you’re doing SR&ED. Whether you succeed or fail, the knowledge you gain about what works, what doesn’t work, or might work in the future on your next attempt, represents a technological advancement.
“I heard that we have to have hypotheses and follow the scientific method. We don’t do that” – For the purposes of conducting eligible experimental development, the hypothesis requirement is simply referring to your “first idea” on how you will attempt to resolve the technological uncertainty you have identified. Once you’ve established that there is a technological knowledge gap related to the project you’re undertaking, the hypotheses requirement relates to your initial ideas on how you might address those uncertainties. The scientific method requirement is met by the simple planning process of your systematic investigation: plan, execute and react accordingly to the results and conclusions along the way as your development work unfolds.
“We get paid for all the work we do” – Think about it this way: Car makers get paid for the cars they sell. They make enough money doing it, (in theory) to cover all their development expenditures. But here’s the key: they get paid for the car, not the SR&ED they had to do to design and make it. Simply put, if you are getting paid to deliver something, but not directly for the SR&ED you’re doing, then you likely have a SR&ED claim to make. The rules can be a little tricky, but that’s what we’re here to help. Who is paying you, and for what, is just one of the considerations that impacts your SR&ED claim, but getting paid by your customers or clients does not necessarily, and usually doesn’t, preclude you from making a SR&ED claim!
“You make it sound like everything we do is SR&ED!” – Well, we know that isn’t going to be the case. But recognizing what is and isn’t SR&ED is the first step in maximizing your access to the cash refunds or tax credits you deserve. Get started today by contacting a BeneFACT SR&ED expert toll free at 1-855-TAX-BACK (829-2225) to answer any questions you may have and to see if you qualify for this lucrative tax program.
Find out more about BeneFACT’s SR&ED Program click here!