Category Archives: Blog

Could Your SR&ED Claims Get Even Better?

We’ve met with many leaders in organizations who are currently filing a successful SR&ED claim. With several years of successful claims under their belt, the organizations are proud they are capitalizing on SR&ED and are quite confident that they understand the rules of SR&ED.

If this describes your organization, take a moment to ask yourself the following critical questions:

Do you understand the CRA SR&ED claim review process and would you be prepared for an audit?
Are you using your time wisely in documenting potential SRED claims or wasting resources by over documenting or documenting areas that are not eligible?
How do you know you are filing and receiving the best possible return?

The CRA SRED claims review process

Due to the volume of SRED claims received each year, the CRA does not manually review each claim. Therefore, even if your claim was accepted, it doesn’t mean that it was done correctly. Claims can be accepted without review based on your past claim history, consistency of claim amounts or chance.

This can be very disturbing for an organization as an audit could leave your company shocked by the discrepancy of your claim from SRED requirements.

Using resources wisely to document SRED

Although the information is available for you to document your own SRED claim, the SR&ED claim process is complex and requires a deep understanding CRA rules and how they are practically applied.

Inexperienced SRED claimants often overdo record keeping and notes. Although proper documentation is required, it is also very specific. Too much documentation of the wrong information is a poor way to spend valuable time and resources. If your team is bogged down in documentation processes and report writing for weeks and months at a time to a level of resource effort that can be close to the value of the investment tax credits being recovered.

Also common is organizations who document projects that turn out to be ineligible for SRED. Being clear what projects or parts of projects are eligible for SRED at the outset is critical to not wasting resources which could counterbalance any returns gained.

Make your SRED claim without the risk of missing the mark

With time and accumulated experience, SR&ED advisors develop a full understanding of the claim process and the documentation necessary to support and successfully defend a claim in the event of a CRA audit.

An experienced consultant can also identify areas where expenditures were neglected, guidelines were misinterpreted or calculations were below the allowable limits set out by the CRA.

On the other hand, a SRED claimant with little filing experience does not have the same level of experience and expertise in identifying the optimal level of recovery. This is particularly true for claimants who have never experienced a CRA audit.

In many cases, a consultant’s review may not lead to enough value to be worth the additional effort, but nothing is lost in trying. In our experiences, the majority of our reviews lead to significant differences – with some claim sizes exceeded by more than tenfold.

Get a free review of your SRED claim

Enhanced Capital Recovery offers a complimentary claim and project review service. We can offer insight into issues or indicators that would make your claim a high risk for audit. At the very least, you will be able to confirm the accuracy of your current claiming process and rest assured that you are receiving the best possible return for your company. Contact us today!

CRA Reviews on the Increase | SRED Advice from the Experts

The Biggest Rise in CRA Reviews

For the past 5 years the CRA has been increasingly reviewing Scientific Research & Experimental Development (SR&ED) submissions – but 2013 may have shown the biggest rise of all. It’s important for your organization to get SRED advice as the federal tax incentive, known as SRED, doles out an impressive $4 billion annually and is the largest form of Federal support for industrial research and development, especially for innovative SMEs.

Our SRED consultants are hearing from companies who in the past have received their refunds without challenge and are now experiencing delays and even reductions in their claim amounts.

Why are these changes happening and what actions can your organization take to address this threat?

Why are more CRA reviews of SRED claims occurring?

The Government of Canada is attempting to make the SRED program more efficient and targeted. It wants to see SRED dollars hitting the mission of the program – to advance Canada’s advancement of technology.

The CRA’s recent policy changes and increase in SRED staffing have been identified as the main reasons for the sharp increase in disputed SR&ED submissions. What this means practically is that more focus is being given to the claims process and there is an increasing need to understand and follow the purpose and intent of the program.

SRED advice for your organization about increasing SRED reviews

With increased scrutiny on SRED claims, it’s more important than ever to utilize the services of a professional SR&ED consulting services firm. Experts who specialize in SR&ED claims have years of experience in identifying eligible costs, stay on top of changes in SRED policy and have a working knowledge of the CRA’s requirements and review process.

Proper project identification

A great deal of company resources can be wasted by documenting projects that turn out to be in-eligible for SRED. It makes sense to employ an expert to help you scope out new projects and determine what projects or parts of projects would be eligible.

Set up your organization for SRED documentation

Once you’ve identified whole or parts of projects that are SRED eligible, it is important to set up a documentation system at the outset of a project, not afterwards. It’s also important to document the correct information. The CRA is looking for documentation that proves a systematic exploration of a hypothesis and clearly shows the steps taken and the reasoning behind them.

It’s just as easy to over-document as it is to under-document your SRED projects and this can waste employee resources and undermine the sustainability of future SRED projects.

Some extra discipline and diligence are needed for time-tracking of employee contributions to the project as well as expenses related to the project. These expenses are best proven when tracked at the time of the project and with proper set-up can be captured efficiently.

SRED Consulting Services

At Enhanced Capital Recovery we’re helping our clients avoid reviews by preparing SRED claims in precise accord with the CRA’s most up to date policies and procedures. If reviews do occur, we’re there to support clients during a review. We also help clients who prepare their own SRED claims by providing a third party review or helping to defend a claim.

Get Help

If your SRED claim is under review or you want to capitalize on a claim either now or in the future, contact us to find out how we can help. We’re happy to provide more information through a free consultation.

The New Innovation | R&D in Canada

Based on a speech delivered by Bombardier Inc. president Pierre Beaudoin on Wednesday, Nov. 13,2013.

Bombardier President Pierre Beaudoin’s ideas and thoughts on innovation send an important message to Canada’s innovators and policy makers. For innovators the message is clear that strategic innovation takes time, patience and investment – but is essential to Canada remaining competitive in a global market place. For policy makers in Canada the message is to support SMEs with even better R&D incentives like the Scientific Research and Experimental Development tax credit.

Beaudoin points out that there is a significant wave of change under way in terms of how innovation is occurring globally. He points out that as a country it is imperative that we pay attention to the changes that are happening and either adapt or be left behind.

He urges that it so important for Canada to keep pace with global innovation because innovation that reaches commercialization builds sustainable growth. Innovative products, processes and services increase productivity, income per capita and the quality of social programs.

The fundamentals of innovation

Fundamentally, innovation requires a number of factors to fall into place:

an entrepreneurial environment and an appetite for risk,
sufficient investment in R&D especially by the private sector,
high quality scientific research centres,
extensive collaboration between universities and industry,
high levels of competition,
access to capital and financing,
and, last but not least, the need to be persistent and tenacious.

In terms of access to capital and financing, Beaudoin affirms the excellence of R&D tax programs like SR&ED. He urges that innovation needs this type of public-private sector partnerships to continue to foster friendly and supportive environments, especially to make long-term research project feasible.

He also suggests some improvements for the SR&ED program and the need for further programs. He states that these programs, although excellent, “do little to alleviate the problem faced by many cash- strapped SMEs who have few options for securing the early-stage funding needed to advance their innovative ideas. This financing challenge often stops innovation dead in its tracks. To address the issue, the taxable income and capital thresholds to qualify for the small business refundable Scientific Research and Experimental Development (SR&ED) tax credit of 35% should be raised to alleviate some of the pressure faced by pioneering SMEs.”

Inclusive innovation

Beaudoin points to a change in how innovation occurs in and beyond the organization, a change that sees more conversations happening with diverse groups of stakeholders. His experience, points to fostering conversations between employees, customers, suppliers, partners, end-users and even competitors.

As a country Beaudoin urges industry leaders and policy makers to make the strategic choice to create value through innovation. By improving Canada’s infrastructure for innovation and by encouraging, expecting and rewarding people for challenging the status quo and risking failure to find a better product, process or service, this can be a reality.

Innovation Resources

As R&D incentive consultants Enhanced Capital Recovery can help your organization capitalize on R&D incentives in Canada. If your organization is innovating products, services or processes, contact Enhanced Capital Recovery today to see how we help support your mission to join to new wave of global innovation.

SR&ED Documentation 101

If you’re reading this article, you already know about the tremendous value of the $3 Billion + worth of innovation funding supplied by the Federal Government of Canada through SRED. What you might not know is how to properly document your projects, to provide a successful SRED claim and a wonderful tax return that can fund further R&D projects and contribute to your bottom line.

The importance of documenting your SRED claim properly

Enhanced Capital Recovery is an end-to-end SR&ED consulting firm, but one area that we add significant value in when we first meet a client is setting them up to capture and document all future SRED eligible projects.

Not only do we add value to your SRED claim today, we help you to add value to your future SRED claims as well – and therefore your company will neither miss claiming valid projects or struggle to prove a claim to the Canada Revenue Agency.

Insights into what the CRA is looking for in a well documented SRED claim

Demonstrate a Methodological Approach

To successfully claim a project as SR&ED, there must be some technological uncertainty that your company is attempting to overcome. Not only must there be technological uncertainty, however, there must be a hypothesis and planned steps to verify or test the hypothesis through to its conclusion.

Merely attempting various solutions will not suffice as this is considered trial and error testing where the only learning is what doesn’t work, not how to adapt and get closer to the desired solution. It’s not even critical that the desired hypothesis is proven – the experimentation could lead to failure and still be submitted as SRED! What is important is that a systematized and documented approach was taken.

Documentation should be completed as the project occurs

This is where it is important to be thinking about SRED at the outset of a project and not afterwards. The CRA is looking for documentation that proves a systematic exploration of a hypothesis – or which steps were taken and why. For example, a failed hypothesis may lead to a new hypothesis. All of this should be documented and part of the SRED claim.

Also, time-tracking of employee contributions to the project as well as expenses related to the project are best proven when tracked along with the unfolding of the project. In general this all has to be set up in advance of the project and takes some extra discipline and diligence during the process.

Why choose Us?

Enhanced Capital Recovery offers its clients a simple go-forward tracking system to help document and track a SR&ED project to the CRA’s strict standards. If you want to capitalize on a SRED claim either now or in the future, start thinking about how you are going to track and document your project. It could mean the difference between the success or failure of your claim.

Please contact us for more information or for a free consultation to see how we can support your company’s SRED claim today!

10 Examples of SR&ED | SR&ED News!

In an important piece of SR&ED News, the CRA has posted 10 draft examples that illustrate key concepts in the Eligibility of Work for SR&ED Investment Tax Credits Policy. The purpose of the examples is to illustrate and clarify key concepts described in the Eligibility of Work for SR&ED Investment Tax Credits Policy.

Here’s a summary of the SRED examples to help you pick out the most useful and applicable ones to your SRED claim.

The difference between technical problem and technological uncertainty – Example 1:

This example of a pump supplier shows how solving a technical problem is not eligible for SRED, but that solving technological uncertainty is.

It is shown that by fixing a technical problem, the pump supplier demonstrated standard practice. By experimenting with several failed attempts to change the conditions that created the problem, the pump supplier demonstrated overcoming a technological uncertainty.

The use of established technology in an uncertain situation – Example 2:

This agri-business example shows that technological uncertainties may arise from limitations in the use of current technology. Although the technology used already existed, since there was no publicly available information on the use of it in this particular application, it qualified as SR&ED to apply the technology to a new situation.

How solving a problem to meet cost targets may qualify for SRED – Example 3:

Although meeting cost targets alone does not qualify for SRED, this example shows that technological uncertainty that arises from the need to avoid using a costly process, could qualify for SRED.

Using standard techniques in a new scenario where the outcome is fairly certain – Example 4:

This greenhouse grower example of SRED not applying shows that applying standard techniques to a new scenario where the results are reasonably expected, does not demonstrate scientific research and experimental development.

Testing a hypothesis – Example 5:

Using a glue producer, this example shows that testing a hypothesis from another scientific discovery and applying it to a manufacturing process is a form of SRED.

The difference between experimental development and trial and error testing – Example 6:

Using a pizza maker as an example, this example shows that by not demonstrating analysis of experimental results, the pizza maker only showed trial and error and not experimental development. This did not qualify as SRED.

New products are not necessarily SRED eligible – Example 7

Showing the example where a company makes a carrot peeler with a glow-in-the-dark handle, which is a new product, but doesn’t challenge any technological uncertainty. Whereas when the company redesigns the handle to improve ease of use and has to experiment with manufacturing processes using new plastics, it meets the criteria.

The part of the project involving applied research is the only SRED applicable part – Example 8

This example shows that a hockey stick maker experimented with a new manufacturing process and conducted testing on the first 500 units. This work counted as SRED, but the subsequent 1500 sticks produced in the project did not.

The same type of work could be considered SRED or not SRED based on whether it is routine work or not. – Example 9

This example shows the work of a lab technologist performing routine data collection which does not apply as SRED and also additional data collection for a SRED project which does apply.

A SRED project may be just a part of a larger company wide project – Example 10

In this electronic component producer example, the producer runs into a problem with the size of one of the components. The producer contracts the miniaturization of the component to another company. This part of the project is considered SRED eligible though the entire project is not.

About Us

Enhanced Capital Recovery’s goal is to assist companies such as yours to truly understand what SR&ED is, what areas in your organization may be eligible under the program, and then assist you through the entire process. Please call us at 1-800-470-0235, visit us online at www.enhancedcapitalrecovery.com or email us at info@enhancedcapitalrecovery.com for a no obligation consultation today!

Looking for Government R&D Funding?

There are two main Government of Canada research and development (R&D) funding sources designed to help Canadian companies undertake technology innovation: Industrial Research Assistance Program (IRAP) and Scientific Research and Experimental Development (SRED). IRAP funding is granted on a pre-approved basis to fund a project, whereas SRED is a tax credit covering up to 68% of eligible expenditures.

IRAP

For companies contemplating projects that would demonstrate technological innovation, and would like to have the project funded, IRAP may be a good option.

IRAP Eligibility criteria

To be considered for IRAP funding, the company must meet some basic criteria and consult an Industrial Technology Advisor from the National Research Council who will assess each project individually based on the strength of the company and specific aspects of the project.

Basic Criteria:

be a small and medium-sized enterprise in Canada, incorporated and profit-oriented;
have 500 or fewer full-time equivalent employees; and
have the objective to grow and generate profits through development and commercialization of innovative, technology-driven new or improved products, services, or processes in Canada.

Assessment of the Company and Project:

the business and management capabilities of the firm and the company’s potential to achieve the expected results and outcomes associated with the proposed project;
the financial capabilities of the firm and its plan to commercialize the developed technologies; and
the technical aspects of the project and its potential impact on the firm.

SRED

SRED may be a better Government R&D Funding option for companies who are already making technological breakthroughs in the course of their business activities.

SRED Eligibility criteria

The CRA outlines three requirements your business must complete to earn SR&ED credits:

You attempted to overcome a technological uncertainty
You used unfamiliar, systematic research and development to solve the problem
You aimed to advance a science or technology in the process

While the experiments must be conducted with a measurable goal, they can involve basic or applied research. This could include many types of research and experimental activities, so don’t be dissuaded if you’re not conducting pure scientific research. For example, experimentation around the goal of improving an artificial flavouring for food or beverage could be eligible.

Your projects do not need to be successful to qualify for funding, as long as you can provide evidence of the attempt.

SRED Consultants

Unlike IRAP, SRED claims must be completed without the guidance of a Government consultant and often requires an in-depth understanding of the program to take maximum advantage of it.

Although the SR&ED program is an amazing financial opportunity, with over $3 Billion dollars in funds distributed yearly to businesses across all industries, complex legislation and complex report preparation have created barriers for businesses which are otherwise eligible to take advantage of it.

In fact, it is normal for businesses preparing their own SR&ED claims to experience significant difficulty in determining which expenditures are eligible. This may lead to eligible expenses going unclaimed.

Who is Enhanced Capital Recovery

Professional consultants such as those at Enhanced Capital Recovery are available to help clients capitalize on their applications and benefit most from the company they worked hard to build.

Our team has brought success to numerous organizations, including those whose claims were initially turned down by the Canadian Revenue Agency. Your company will work with SR&ED Consultants knowledgeable in the industry to recover the most funding possible.

For more information about SRED, IRAP or Province specific R&D funding opportunities, please submit a contact form and our team will arrange a free assessment of your case.

Is Your Company Eligible for SR&ED Funding?

According to recent research, some myths about the Scientific Research and Experimental Development tax credit have led over 58% of companies in Canada to ignore the $3 billion + per year opportunity offered by the Federal Government of Canada.

As examples, many companies fail to make an SRED claim because they assume the program is restricted to technology companies, companies performing laboratory style research, or large companies with massive R&D budgets.

The truth is that virtually every company completes some activities during the course of business that may be eligible for SR&ED funding. In general, if some of your staff are engaged in solving technological problems for which a solution is not readily available, there is a good chance that the work they are doing is fully or partially eligible for SRED.

Over all, the companies who receive SRED credits span a wide range of industries from manufacturing to Agri-business, to food manufacturing, oil and gas service companies – and of course tech companies.

Who is Eligible for SRED funding?

Almost any Canadian company can be eligible to apply for Scientific Research and Experimental Development (SRED). Here are the details of the criteria from a company perspective:

Your R & D took place within Canada
You have proof of expenditures related to the claimed projects, for example T4s, and/or invoices
You have ownership of the Intellectual Property resulting from the project
You are in good standing with government financial reporting
Your project expenses were incurred within 18 months of the fiscal year-end as of filing

How much can I expect from a SRED claim?

The amount returned through SRED depends on the amount you spent of eligible projects conducted in Canada. Since salaries are a big part of the claim, entrepreneurs who do not pay themselves a salary can be diminishing the size of their claim.

Enhanced Capital Recovery can help you set up your company for SRED success by showing you how to structure your company and document your projects to maximize success. Outsourcing work overseas can also diminish the size of your SRED return, since eligible expenses must occur in Canada.

A large portion of salaries of all employees and a portion of the shareholder’s salaries engaged in the projects, contractor fees as well as cost of all materials used or consumed in the course of the research work may be recoverable under this program. Companies may also claim cost of any prototype equipment or facilities developed for undertaking the project. The program allows you to claim up to 65% of the salaries and expenses related to the project.

About Us

Please call us at 1-800-470-0235, visit us online at www.enhancedcapitalrecovery.com or email us at info@enhancedcapitalrecovery.com for a no obligation consultation today!

Looking for Government R&D Funding?

There are two main Government R&D funding sources designed to help Canadian companies undertake technology innovation: Industrial Research Assistance Program (IRAP) and Scientific Research and Experimental Development (SRED). IRAP funding is granted on a pre-approved basis to fund a project, whereas SRED is a tax credit covering up to 68% of eligible expenditures.

IRAP

For companies contemplating projects that would demonstrate technological innovation, and would like to have the project funded, IRAP may be a good option.

IRAP Eligibility criteria

Basic Criteria:

be a small and medium-sized enterprise in Canada, incorporated and profit-oriented;
have 500 or fewer full-time equivalent employees; and
have the objective to grow and generate profits through development and commercialization of innovative, technology-driven new or improved products, services, or processes in Canada.

Assessment of the Company and Project:

the business and management capabilities of the firm and the company’s potential to achieve the expected results and outcomes associated with the proposed project;
the financial capabilities of the firm and its plan to commercialize the developed technologies; and
the technical aspects of the project and its potential impact on the firm.

SRED

SRED may be a better Government R&D Funding option for companies who are already making technological breakthroughs in the course of their business activities.

SRED Eligibility criteria

The CRA outlines three requirements your business must complete to earn SR&ED credits:

You attempted to overcome a technological uncertainty
You used unfamiliar, systematic research and development to solve the problem
You aimed to advance a science or technology in the process

Your projects do not need to be successful to qualify for funding, as long as you can provide evidence of the attempt.

SRED Consultants

Unlike IRAP, SRED claims must be completed without the guidance of a Government consultant and often requires an in-depth understanding of the program to take maximum advantage of it.

Who is Enhanced Capital Recovery?

Professional consultants such as those at Enhanced Capital Recovery are available to help clients capitalize on their applications and benefit most from the company they worked hard to build.

For more information about SRED, IRAP or Province specific R&D funding opportunities, please submit a contact form and our team will arrange a free assessment of your case.

Research and Development Tax Credits for App Developers

The outbreak of smart phones in the past decade has resulted in the technological convergence that will likely define an era. To compliment this new technology has been the creation of mobile applications, “apps,” that aid and entertain over a billion users around the world.

Canadian app developers are at the forefront of these modern conveniences-turned-essentials, and are already benefiting from Scientific Research and Experiment Development (SR&ED) tax credits. Here is how your business can reap the SR&ED rewards, as well.

Why is app development important to the federal government?

Once considered just a facet of the software and communication industries, app development has blossomed into a sector of its own. Economists project global app sales to eclipse $25 billion this year, nearly $1 billion from Canada’s 50,000-employee app workforce alone.

The federal government is recognizing the impact that app development has on the economy and the potential to attract highly-skilled app creators to Canada. This opportunity to become a leader in the global app marketplace has the Canadian Revenue Agency (CRA) rewarding those contributing to the industry.

How is creating apps considered “research and development?”

The CRA rewards Canadian companies that undertake experiments for the sake of advancing technology—whether or not there is an intended use after the fact.

Software developers do this on a daily basis when trying to create apps that overcome technical barriers. For example, cached turn-by-turn GPS navigation solved drivers’ difficulty of navigating roads outside of cell phone service range.

In addition to creating public direct-to-sales apps for Android, Apple, BlackBerry, and Windows devices, businesses that produce apps for another company’s specific use are also eligible. Perhaps your firm was approached to create an app that allows your client to share inventories through their smart phones.

These examples and others are instances where research and development is used in creating apps. As per general SR&ED criteria, market research, sales promotions, routine testing, and stylistic changes are not eligible for funding.

What expenses can be recovered?

Since all research and experiments must be conducted systematically and not at random, there must be a specific technical barrier in mind prior to developing the app. Once this requirement is satisfied, a variety of expenses can be recovered through the SR&ED program

The CRA funds “wages, materials, machinery, equipment and some overhead.” This means app developers may claim salaries for employees who directly worked on the project, hardware necessary to create the app, and other related fixed costs.

If you are a Canadian app developer—or a business in an unrelated industry that created or improved software to solve a technical uncertainty—contact Enhanced Capital Recovery with SRED consulting offices in Vancouver, Edmonton and Toronto today. Our no-risk consultation will allow you to discover how much SR&ED funding you are eligible to receive!

For a free consultation, complete our contact form, call us at 1-800-470-0235, or email us at info@enhancedcapitalrecovery.com.

Given Up on Federal R and D Tax Credits?

Has your company investigated federal R&D tax credits, such as Scientific Research and Experimental Development (SRED) and been disappointed or dissuaded by the results? Or perhaps you’ve hired an accounting or consulting firm to handle your SRED claim and still not had much success?

Enhanced Capital Recovery has worked with several companies who have been in the exact same position – including one where an accounting firm or SR&ED consulting firm had dismissed the viability of a SRED claim and yet a valid claim existed!

In the case of a technology start-up we have worked with over the past 5 years, an accounting firm as well as the CRA had discouraged the company stating that their projects did not qualify for SR&ED. Fortunately, an insider recommended a review by Enhanced Capital Recovery. We looked at their challenges and how they were trying to overcome them and over a 15 min call assessed that they were eligible for SR&ED. Over the last 4 years we have helped the company recover in excess of 750,000 dollars which they have since reinvested to grow their business!

What did Enhanced Capital Recovery do differently? By engaging a technical expert who understood the company’s technology challenges on a technical level and being able to articulate them in a manner the CRA recognized as a valid SR&ED application, we created a successful SRED claim out of a potentially failed one.

If you’ve had a failed SRED claim or have given up the idea claiming for SRED because of the effort it takes to put a claim together, consider a 15 minute discovery call with an ECR consultant. We’ll ask you some relevant questions and very quickly assess the validity of your claim.

We will then engage a technical specialist knowledgeable in your industry who can further assist in identifying and documenting all the challenges you have tried to overcome so you have a complete and successful claim where all your eligible expenses are recovered.

Our goal is to assist companies such as yours to truly understand what SR&ED is, what areas in your organization may be eligible under the program, and then assist you through the entire process.

Let us do all of the work so it is a positive experience for your team that enables you to work on more eligible projects and increase your competitive advantage- all with no upfront costs for your organization.

We’ve helped many companies identify, document and successful claim SRED – let us review your claim to maximize your SR&ED return today. Read more about why we are industry leading SRED consultants.

For a free consultation, complete our contact form, call us at 1-800-470-0235, or email us at info@enhancedcapitalrecovery.com.