A Leader in SR&ED Tax Credits and Government Grants - IRAP vs SRED … · IRAP vs. SR&ED Tax Credits SR&ED and IRAP are both federal government programs that offer financial incentives

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IRAPvs.SR&EDTaxCredits

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IRAPvs.SR&EDTaxCredits

SR&EDandIRAParebothfederalgovernmentprogramsthatofferfinancialincentivestobusinessesundertakingresearchanddevelopment(R&D)activitiesinCanada.Businessesthatareeligibleforoneprogramareofteneligiblefortheother.Totakeadvantageofbothopportunitiesit’simportanttounderstandthekeydifferencesbetweenthetwo.

Introto

RDPAssociates workswithbusinessesacrossawidearrayofsectorsandsupportstheaccesstovariousformsofGovernmentfunding.Weassistbothstart-upsandestablishedbusinesseswithgainingaccesstofinancialassistancefortheirinnovationandbusinessexpansionprojects.GovernmentfundingprogramsthatRDPspecializesinaretaxcreditsandbusinessgrants.

RDP isdistinctlydifferentfromitscompetitorsasithasitsownin-housetechnicalanalysts,whohavespecializationindifferentbusinessverticals.

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TheScientificResearch&ExperimentalDevelopment(SR&ED)TaxCreditisafederaltaxincentiveadministeredbytheCanadaRevenueAgency(CRA)since1986.ItspurposeistoencourageCanadianbusinessesofallsizesandinallsectorstoconductresearchanddevelopmentinCanada.

Fundingisprovidedasataxcredittoreducetheincometaxpayable.Insomeinstances,thecreditmaybefullyorpartiallyrefundable,resultinginacashreimbursement.

WhatisSR&ED?

WhatisIRAP?

TheIndustrialResearchAssistanceProgram(IRAP)isafundingmechanismadministeredbyCanada’sNationalResearchCouncil(NRC)since1962.Itoffersnon-repayablecontributionstoacceleratethegrowthofsmallandMedium-sizedbusinesses,withthegoalofstimulatingwealthcreationforCanadathroughinnovation.

Fundingisprovidedascashreimbursementsagainstclaimedprojectexpenses.

SR&ED IRAP

Costcoverage

15-35%ofeligibleexpenseswithadditionalprovincial/territorialcreditsmaybeavailabletostackupto42%(Ont.)totalcredit.

50%-80%ofeligibleexpenses

Maximumfunding Nolimit $10millionperproject

Numberofprojects Nolimit 1projectperyear

ProgrambudgetNolimit,givesoutapproximately$3billionannuallyonaverage

$157millionannually

FundingStatsIRAPVS.SR&EDTaxCredits

SR&ED IRAP

EligibleclaimantsBusinessofanysizeoperatinginCanada

For-profitbusinesswithfewerthan500full-timeequivalentstaffinCanada

EligiblecostsInternallabour,Canadiansubcontractors,materials,overheads

Internallabour,Canadiansubcontractors

Oddsofsuccess

SR&EDisanentitlementprogram– ifyourcompanycarriedouteligibleR&Dwork,andfiledyourclaimcorrectlywithpropersupportingdocumentation,youarelegallyentitledtoreceivethefunding.

Evenifyoumeetalloftheeligibilitycriteria,IRAPfundingisnotguaranteed.BusinessesmustcompeteforthelimitedpooloffundingbysubmittingastrongapplicationforaninnovativeprojectwhichpromisesmanybenefitstoCanada.

EligibilityIRAPVS.SR&EDTaxCredits

SR&ED IRAP

Availability Year-roundFirst-comefirst-serveduntilregionalbudgetisdepleted

Besttimetoapply WithyourcorporatetaxreturnNearstartofgovernmentfiscalyear(April1)

Deadlinetoapply18monthsaftertheendofyourfiscalyearinwhichtheR&Dexpenditureoccurred

Beforeyourprojectbegins

Processingtime 2-6months 1-3months

Timingofpayout InfulluponclaimapprovalMonthlyinstallmentsoverprojectduration

TimelineIRAPVS.SR&EDTaxCredits

ItispossibletoclaimbothSR&EDandIRAPtoincreaseyouroverallcostrecovery.AnyIRAPfundingreceivedmustbedeductedfromyourtotaleligibleexpendituresbeforecalculatingyourtaxcredit.However,notallprojectexpensesareeligibleforbothprograms.Certainactivitiesareentitledtodifferentcoveragerates.CarefullyallocatingyourcostsbetweenprogramscanminimizeoverlaptoreducetheimpactonyourSR&EDclaim.

ClaimIRAPagainst: ClaimSR&EDagainst:

• Duediligenceactivities(i.e.marketresearch,patentsearches,commercialdevelopment)

• Contractorcosts

• Overheads• Materials

Keeping rigorous project documentation is critical to show separation of these costs sothat your claims can be defended.

StackingIRAPVS.SR&EDTaxCredits

TaxCreditsandGrants

TotalEligibleSalary

Expenditure

SR&EDProxy

(overheads)

TotalIRAPFunding

TotalofTaxCredits

TotalofFundingandTaxCredits

%ofSpendRecovery

IRAPOnly $1,000,000 $150,000 $150,000 15%

SR&EDOnly $1,000,000 $550,000 $655,541* $655,541 65.5%

IRAP&SR&ED $1,000,000 $550,000 $150,000 $592,102 $742,102 74.2%

Although receiving both IRAP and SR&ED funding reduces the amount of tax credits earned, it increases the overall spend recovery.* Please note that the example above is based on eligible expenditures incurred in Ontario at the enhanced SR&ED federal ITC rate.

Below is an example of how funding could be calculated for a company who spent $1 million in labour costs on R&D and is eligible for a 44% tax credit rate. We have also assumed that the company receives $150,000 in IRAP funding. This is for illustrative purposes only, as IRAP funding may be more or less than $150,000 depending on project quality and funding availability.

StackingIRAPVS.SR&EDTaxCredits

Contactus

ThankYou!

ForacomplimentaryassessmentofyourSR&EDclaimsandyoureligibilityforSR&EDtaxcredits,contactusat:

[email protected]:(416)368-9341

Foracomplimentaryassessmentofyourgranteligibility,contactusat

[email protected]:(416)368-9341

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