WHAT WORK QUALIFIES FOR SR&ED TAX INCENTIVES?
To qualify as SR&ED, your work must meet the definition of one of the following: basic research, applied research, or experimental development.
This is work carried out to advance scientific knowledge. It’s usually done in universities or research institutes. So, this type of research is purely to gain scientific knowledge.
It’s also work carried out to advance scientific knowledge but, unlike basic research, it’s done with a specific practical application in view.
This work is carried out to achieve technological advancement. It’s also by far the most common type of SR&ED work.
TECHNOLOGICAL ADVANCEMENT DEFINED
Technological advancement means that you are generating information or knowledge to advance your technology base. This, in turn, will help you to develop new products or processes or improve existing ones.
A word of caution: a new or improved product does not always mean that a technological advancement was achieved. So how do you know that you’ve achieved technological advancement?
An easy way is to ask yourself:
What technological uncertainties did you encounter when you tried to develop the product or process? Technological uncertainties are barriers that prevent you from achieving your goals. The knowledge that you gain in overcoming those barriers is the technological advancement. So far we’ve talked about why SR&ED work is done.
TECHNOLOGICAL ADVANCEMENT HOW IT’S DONE
Let’s now look at how SR&ED work is done. No matter what type of SR&ED work you do, you have to follow certain basic procedures. Your work must be a systematic investigation or search by means of experiment or analysis.
And what does that mean? Well, it means that each approach you take to resolve your uncertainty should be a planned experiment based on an idea or a concept.
So, you start with a problem that you can’t solve with the existing technology base or knowledge. Then you suggest new ideas for how to solve the problem and you test them. This will eventually lead you to increase your technology base or knowledge. In a nutshell, if you’re doing a systematic investigation or search, by experiment or analysis, to advance science or technology, your work qualifies! It’s that simple! Now you know what kind of work qualifies.
The main lesson learned by AHI during the last five years is that the CRA is really enforcing the statement made on its website:
“Work for which you have no relevant supporting evidence will likely be disallowed”
So it’s important for any successful claim to be able to track and document your SR&ED activities and related cost in a systematic manner as the SR&ED activities is being carried out.
Our AHI professionals will share with you a proven, simple and reliable way of tracking and documenting all your SR&ED work that will expedite the approval of your claims.
The supporting technical and financial documentation generated while you are conducting your SR&ED work is your best chance of having your claim approved. Documentation that is dated, signed, and specific to the work performed are the best supporting evidence you can provide.
CRA gives examples of supporting evidence in the following table: