This presentation walks you through the Scientific Research and Experimental Development (SR&ED) tax credits program. This is a Federal Tax incentive program for Innovation administered by the Canada Revenue Agency (CRA).

1. SR&EDuca)on
–
PASC
March
19,
2014
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2. Agenda
1. SR&ED
Overview
2. Industry
Examples
3. Recoverable
Amounts
&
Qualifying
Expenditures
4. Program
Changes
5. Financial
&
Technical
Tracking
6. Timeframe
for
Claiming
7. CRA
Reviews
8. About
Boast
Capital
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3. What
is
SR&ED
• Scien)fic
Research
and
Experimental
Development
tax
credits
• Federal
Tax
Incen)ve
program
for
Innova)on
administered
by
the
Canada
Revenue
Agency
(CRA)
–
Cost
Recovery
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4. • Technology
Advancement
Sought
• Technology
Uncertain)es/Challenges
• Technical
Content
(Itera)ons)
Iden)fying
SR&ED
Eligibility
4
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5. Industry
Examples
• Developing
New
Tools,
Sensors,
Chemicals
for
down
hole
environments
• Applying
technologies
in
ways
they
weren’t
intended/designed
to
be
applied
• Evalua)ng
SAGD
well
pairings
and
determining
new
process
from
that
data
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6. Industry
Examples
• Retrofiang
an
exis)ng
piece
of
equipment
to
use
for
a
different
func)on
than
its
originally
intended
func)on
• Developing
a
sodware
system
that
needs
to
be
backward
compa)ble
with
an
old
legacy
system
(context
of
your
company)
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7. Industry
Examples
• Overcoming
hardware
limita)ons
in
order
to
achieve
an
aggressive
performance
target
or
light
footprint
• Integra)ng
disparate
sodware
systems
that
weren’t
meant
to
communicate
with
each
other
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8. What
Can
be
Claimed
• Salaries
*
• Overhead
(Tradi)onal
vs.
Proxy)
• Sub-­‐Contractors
*
(80%
of
expenditure)
• Materials
(Expired
Dec
31,
2013)
• Capital
Expenditures
(Expired
Dec
31,
2013)
*
Work
must
be
carried
out
in
Canada
(10%
allowed
outside
of
Canada/preformed
by
Canadian
Tax
payers)
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9. Recoverable
Amounts
CCPC
–
Refundable
ITC’s
• Salaries
–
~64%
• Sub-­‐Contractors
-­‐
~32%
• Materials
-­‐
~40%
(Expired
Dec
31,
2013)
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10. Recoverable
Amounts
Non-­‐CCPC
–
Nonrefundable
ITC’s
• Salaries
–
~36%
• Sub-­‐Contractors
–
~18%
• Materials
–
~28%
(Expired
Dec
31,
2013)
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11. Calcula)on
of
Recoverable
Amounts
• Salaries
*
Proxy
Overhead
(55%)
=
X
• X
*
Provincial
%
(10%)
=
Y
• X
–
Y
=
Z
• Z
*
Federal
Amount
(35%
or
15%)
=
A
• A
+
Z
=
Total
ITC’s
(~64%
or
~32%)
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12. Calcula)on
of
Recoverable
Amounts
• Sub-­‐Contractor
Costs
*
0.8
=
X
• X
*
Provincial
%
(10%)
=
Y
• X
–
Y
=
Z
• Z
*
Federal
Amount
(35%
or
15%)
=
A
• A
+
Z
=
Total
ITC’s
(~32%
or
~18%)
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13. Percentages
Breakdown
CCPC
Non-­‐CCPC
Federal
Percentage
35%
15%
Provincial
Percentage
10%
(Alberta
&
BC)
10%
(Alberta
&
BC)
Refundable
YES
Federal
–NO
AB
Provincial
–
YES
BC
Provincial
-­‐
NO
Totals
Up
to
64%
Up
to
36%
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14. Rate
CCPC
Refundable?
Other
Corporations
Refundable? Expenditure Limit
Alberta 10% Yes Yes Up to $4M in expenditures
British Columbia 10% Yes No Up to $3M in expenditures
Manitoba 20% Yes [1] Yes [1]
New Brunswick 15% Yes Yes
Newfoundland and Labrador 15% Yes Yes
Northwest Territories
Nova Scotia 15% Yes Yes
Nunavut
Ontario
Business research institute tax credit (OBRI) 10% Yes Yes Up to $20M in expenditures
R&D tax credit 20% Yes Yes Up to $3M in expenditures
(ORDTC) [8] 4.50% No No Up to $3M in expenditures
Prince Edward Island
Quebec
R&D Wage Tax Credit
17.5% or
37.5%] Yes [2] Yes [2]
University, public research center and research
consortium tax credit 35% Yes Yes
Private partnership tax credit 35% Yes Yes
Saskatchewan 15% Yes No
Yukon 15% Yes [3] Yes [3]
[1]$%$Partially$refundable$%$50%$%$for$in$house$expenditures$and$100%$refundable$for$eligible$contracts$
with$a$qualified$research$institute$
[2]$%$Quebec$Canadian%controlled$corporations$with$less$than$$50$million*$in$assets,$on$an$associated$
basis,$can$claim$the$37.5%$rate$on$up$to$the$spending$limit$of$$3$million*$of$R&D$wages,$on$an$
associated$basis.$For$those$with$assets$between$$50$million*$and$$75$million*,$the$37.5%$rate$is$
gradually$reduced$to$17.5%.**$The$rate$is$17.5%**$for$all$other$taxpayers.$$50%$of$payments$to$arm's$
length$subcontractors$are$eligible$for$the$credit.$All$thresholds$are$in$respect$of$the$previous$year,$on$
a$worldwide$associated$basis.
[3]$%$15%$of$eligible$expenditures$made$to$Yukon$College$only
No provincial R&D tax credit
No provincial R&D tax credit
No provincial R&D tax credit
Provincial R&D Tax Credits
Provincial
Amounts
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15. Recent
Program
Changes
• Eliminate
capital
expenditures
§ For
expenditures
incurred
ader
Jan
1,
2014
• Lower
the
overhead
proxy
amount
§ Current
55%
(
was
65%
in
2012
and
60%
in
2013)
• Lower
%
of
subcontractor
payments
§ Currently
80%
(was
100%
before
Jan
1,
2013)
• Lower
federal
SR&ED
rate
for
large
corps.
§ Currently
15%
(was
20%
before
Jan
1,
2014)
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16. Financial
Tracking
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17. Technical
Tracking
Documenta)on
should
be:
• Contemporaneous
• Dated
• Highlight
technological
obstacles/challenges
Examples
–
Timesheets,
Engineering
Books,
Versioning
Control
on
Itera)ons,
Technical
Challenges
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18. How
to
File
• Complete
the
T661
form
(Sch.
32)
• Complete
T661
Part
2
form
(Sch.
60)
– For
each
project
claimed
• Complete
the
provincial
forms
– AT1
Sch.
9
and
Sch.
9
List
in
Alberta
• File
completed
tax
return
electronically
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19. Time
Frame
for
Claiming
18
Months
past
the
fiscal
year
end
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20. Claim
Turnaround
Time
From
receipt
of
a
complete
claim:
• Current
filing
(CCPC)
–
120
days
• Amended
filing
(CCPC)
-­‐
240
calendar
days
• Non-­‐Refundable
(non-­‐CCPC)
–
365
days
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21. CRA
Claim
Review
Process
• CRA
SR&ED
review
division
– Reviews
ONLY
SR&ED
expenditures
and
technical
content
(not
the
company's
FS,
etc.)
• 3
types
of
CRA
reviews
– FTCAS
(First
Time
Claimant
Review)
– Desktop
– Financial
only
– Technical
&
Financial
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22. CRA
Review
Likelihood
• Expenditure
makeup
– Large
subcontractor
expenditures
– Large
materials/capital/lease
expenditures
– High
percentage
of
specified
employees
being
claimed
• Claim
size
– Rela)ve
size
($100K+
in
ITC
is
likely
to
be
reviewed)
– Expenditure
size
as
%
of
overall
company
expenditures
• Date
of
last
review
– Reviews
are
likely
to
occur
every
4/5
years
• Significant
increase
in
ITC’s
claimed
year
over
year
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23. Dealing
with
SR&ED
Receivables
• Use
professional
judgment
on
the
likelihood
of
receipt
and
treat
like
any
other
AR
• Claimant
history
and
SR&ED
claim
makeup
dictate
CRA
audit
risk
(AR
risk)
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24. Who
Should
Claim
1. Financial
Risk
2. Technical
Direc)on
of
Project
3. Results
of
the
research
-­‐
IP
Ownership
4. Contract
for
services
vs.
goods
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25. About
Boast
Capital
• R&D
Tax
Credit
Consul)ng
Firm–
Calgary,
Vancouver,
Silicon
Valley
• Events
–
Innova)on
Funding
Seminars,
Next
Event
May
13,
2014
in
conjunc)on
with
CED
• Wri)ng
–
Oil
&
Gas
Magazine
(OGM),
Calgary
Herald
Startup
of
the
Week,
Techvibes
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26. Boast
Capital
Work
• Industries
of
Exper)se
– Oil
and
Gas
Services
– Sodware
Development
&
IT
– Manufacturing
– Agriculture
– Bio
Tech
• Con)ngency
based
work
• Invoice
on
a
percentage
of
ITC’s
received
by
company
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27. Boast
Capital
Team
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28. Ques)ons
or
Comments?
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29. Contact
Informa)on
Jeff
Chris)e
–
VP
Alberta
and
Prairies
403-­‐589-­‐2809
jchris)e@boastcapital.com
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