Are You Taking Advantage of the SR&ED Tax Credit?
We know, you probably aren’t up to speed on all of the business tax credits available. As an entrepreneur, your job is to stay on top of your day to day operations. At Numetrica, our job is to know every tax credit that can benefit your business and save you money. Today, we are writing this blog to let you know there is a specific tax credit out there most companies don’t know about, including you!
It’s easy to claim and you just might be eligible. So, what is this special tax credit? We are talking about the SR&ED Tax Credit. In Canada, this is a Scientific Research and Development Tax Credit only certain businesses are eligible for. Let’s take a look at exactly what the SR&ED Tax Credit is and how it can help you save money.
What is SRED?
The SR&ED Tax Credit, also known as the SRED Tax Credit or even referred to as “Shred,” stands for The Scientific Research and Experimental Development Program. In Canada, this program has been designed to help reimburse companies who need to conduct research and development for their business. But not every business can apply.
Who is Eligible?
As its name suggests, this tax credit falls under the category of “scientific research and experimental development.” What does that mean exactly? Any company that falls under the scope of scientific work such as laboratories and biotech qualify. Notably, that doesn’t cover the range of most businesses.
However, if you are in any way in the technology space, you may be able to claim a SRED Tax Credit. It also extends to engineering, software development and tech start-ups. If you are trying to make any advancements at all in the software you create, this is considered Research and Development by the Canadian government.
How Much Money Are We Talking About?
Alright, let’s get to the part you care about the most. How much of a tax credit will this get you? We’ll get to that in a moment. First, you need to ask, in what form will this credit apply?
There are three ways you can earn the SRED Tax Credit:
- Income Tax Reduction
- Investment Tax Credit
- As a Refund
Now, how much can you expect to get? If you are a CCPC, you can look forward to receiving up to 35% of your qualifying Research and Development expenses, up to $3 million.
Not a CCPC? Expect a flat rate of 15% of your Research and Development fees to be credited.
Both can be claimed against what you owe or sometimes can be refundable, depending on your business niche.
Do Business Need to be Profitable to Quality?
Perhaps the best part about the SR&ED Tax Credit, is that your business does not need to have revenue in order to apply. The Canadian government encourages innovation and that doesn’t always equal an immediately profitable business. Besides, how can you even start a tech company without first developing your product?
How Long Does It Take?
The SRED Tax Credit can be faster to complete than a typical loan or new investor coming on board at your company. In fact, most claims are processed in less than 60 days. In the event that your business comes under further review, or if you are looking for a refundable credit, this process can take up to 180 days.
How Do I Claim my SRED Credit?
We thought you’d never ask. When it’s time for you to apply for your SRED Tax Credit, Numetrica is here for you. As long as we have the information we need, we can both prepare and file this on your behalf.
First, you want to make sure that your company actually has a chance of receiving the credit. Make sure that the scope of your research falls under the guidelines. You must show proof of technological uncertainties, technological advancements, and scientific or technical content. Any claim submitted without documented proof will be immediately denied.
As a business owner, tax credits are probably the last thing on your mind. You need a strategic partner like the superheroes of Numetrica to help walk you through any tax credit application. Not only will we help you apply for the SRED Tax Credit, we will help you obtain any tax credit that is applicable for your industry.
At Numetrica, we are ready to be your personal, virtual Chief Financial Officer, and take on any financial responsibilities from cloud accounting to tax credits. We’re here for you!