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SR&ED and Business Tax Incentives
Tax refunds for R&D
Canada promotes innovation through one of the richest scientific research and experimental development (SR&ED) tax incentive programs in the world. Credits of 20–30% of the development costs for new or improved products and processes are available from the federal government, and additional provincial incentives may also be applicable.
With one of the country’s largest teams of dedicated SR&ED professionals, EY can help maximize your SR&ED claims, leaving you free to run your business.
Making it easy
We hire engineers, scientists, and accountants with deep industry experience who understand the technological advancements being sought and how to best approach your claims. Every person on our team is a full-time SR&ED professional — we don’t “dabble” in SR&ED.
Whether you’d like advice on how to manage your claims in-house or wish to outsource the process entirely, a few hours spent with our team is a no-risk exercise that can reveal tax credit opportunities for current and previous years’ activities.
With a proven track record and an excellent relationship with CRA, we execute well-documented claims so that you have comfort in obtaining your expected outcome.
With the largest tax controversy practice in Canada, we can also help you defend your claim.
Learn more about our services:
- Navigating the SR&ED claims process
EY’s dedicated SR&ED professionals have emerged as leaders in the SR&ED space, helping companies get the most out of R&D tax incentives. Here are some of the services we provide to support you through the claims process.
SR&ED claim planning
Did you know the CRA likes to see SR&ED claims structured according to technological advancement? (It’s also the best way to identify the full extent of work that went into development.) We can work with you to plan your claim to meet this and other CRA preferences, helping to optimize your return on investment.
SR&ED claim process management
Choosing the right process model to demonstrate your eligible activities and costs is imperative to maximizing the value (and ensuring the defensibility) of your SR&ED claim. With experience in every industry and sector, we can recommend the process that will yield the most value with the least disruption to your business.
SR&ED claim preparation
We have the dedicated resources to focus on the unique issues and opportunities surrounding your claim; whether we write your project description for you or support your team’s in-house preparations, we can help maximize your return based on your corporation’s tax history and projected taxable income, recommending strategies for using federal and provincial SR&ED incentives to improve on past results.
SR&ED claim defense
The key to a successful SR&ED audit is to be prepared. SR&ED claims can be subject to rebuttal, arbitration, objection or appeal, but we have a wealth of experience to help you focus on the issues that will support your claim and allay CRA concerns. We can guide you through the audit process or conduct an audit defense on your behalf.
- SR&ED tax credit eligibility
Are you creating new products, developing new processes, or using new materials? If so, your business may be eligible to claim the SR&ED tax credit. In fact, many companies perform qualifying work without realizing it. EY can determine if your business is eligible. And even if you know you qualify, we can help you improve the yield and return on your claims.
If your organization is a proprietorship, a partnership, or a corporation carrying on business in Canada, you may qualify for a cash payment and/or credit against taxes payable.
- Overhead—traditional or proxy method
- Subcontracting fees
- Capital equipment
- Third-party payments.
Scientific or Technological Advancement: Project must generate information that advances our understanding of scientific relations or technologies, or be intended at the outset to advance a technology beyond the existing state of the art. Overcoming a technological uncertainty, by definition, will result in a technological advance.
Scientific or Technological Uncertainty: Project must contain technological uncertainty:
- The taxpayer is uncertain whether the goals of the project can be achieved at all; or
- The taxpayer is fairly confident that the results can be achieved but is uncertain which of several technical alternatives (e.g., routes, approaches, equipment configurations, architectures) will meet the desired specifications within business constraints.
Scientific and Technical Content: The project must demonstrate that it incorporated the scientific method—a systematic investigation. Work must be supported by some form of evidence and performed by qualified people.
SR&ED project categories
- Basic Research—Work undertaken to advance scientific knowledge without a specific practical application in view.
- Applied Research—Work undertaken to advance scientific knowledge with a specific application in view.
- Experimental Development—Work undertaken to achieve technological advances for the purpose of creating new, or improving existing, materials, devices, products or processes, including incremental improvements.
- Support Work—Work that directly supports and is commensurate with the needs of basic research, applied research, and experimental development in the following areas: engineering, design, operations research, mathematical analysis, computer programming, data collection, testing, and psychological research.
- Frequently asked questions
How does the contingency fee work and when do I pay?
EY charges a percentage of the final refund you receive from Canada Revenue Agency (CRA). The reason for this is twofold. Firstly, our clients do not (necessarily) have the funds to pay us upfront for a new and uncertain service and prefer to pay us out of the refund cheques they receive from CRA. Secondly, the contingency fee gives EY a stronger incentive to maximize your SR&ED claims. We monitor your claim throughout the CRA process until you receive your refund. We are with you every step of the way!
What is the refund rate for our company?
This depends on your corporate ownership structure. Federally, Canadian-controlled private corporations (CCPCs) receive the enhanced input tax credit refund rate of 35%. Foreign-owned, publicly traded sole proprietorships, and partnerships receive a 20% tax credit. There are also substantial provincial refunds that we will claim for you depending on your location. With offices across Canada, we are available to serve you from coast to coast.
…but I don’t do R&D?!
SR&ED is different than what you may typically think of as R&D. The federal SR&ED program refunds work done, including prototyping, testing, and developing technologically advanced products or processes.
…but we don’t pay taxes yet?!
That’s OK. Your company is still eligible. Even if you are in a loss position, CCPCs are eligible to receive a refund on their SR&ED expenses.
I already receive government funding. Can I still claim?
Yes. We are able to claim for the excess amount of costs, above and beyond what you receive. For example, if you spend $100 on SR&ED and you receive $15 from another program, we would be able to claim for the remaining $85 of costs.
When is my SR&ED claim due?
SR&ED claims are due to the CRA 18 months after your fiscal year end. For example, if you have a December 2011 year end, your claim will be due in June 2013. This is a firm deadline and all claims must contain the specified CRA documents to be considered complete. If you fail to submit the proper documentation by the deadline, your claim will be disallowed and no refund will be given.
- Why use EY for your SR&ED refund?
Here are just a few reasons to choose our SR&ED team:
We see the forest for the trees
Our industry professionals don’t just know SR&ED, they also know their industry focus areas, saving you time and seeing that you get the most out of the incentive benefits available to you.
We don’t dabble
We were the first fully dedicated R&D team in Canada, and this focus provides us with unique perspective on the program that we bring to our clients.
We will be your ally for the long-term
We will work hard to earn your trust because we believe in strong long-term relationships. In fact, we still work with our very first R&D client — who has consistently given us great results, with no surprises.
We can help you through every step of the R&D lifecycle
We can scale and customize our services to meet your needs at every turn — from planning and managing the claim process to helping you file and even defend your return.
We share our global knowledge and experience with you
We are the most globally integrated firm out there, and that means our global R&D network can work together to provide you the most effective use of R&D benefits worldwide.
| Susan Bishop |
SR&ED and Business Tax Incentives
416 943 3444
Contact a member of our team.
Globalization of the pharmaceutical industry and increased outsourcing have drastically changed the R&D landscape. Our report explores the impact on R&D tax incentives.