Fund Your Innovation - SR&ED Tax Credits and other Government Grants

LEVERAGE SR&ED TAX CREDITS & OTHER GOVERNMENT GRANTS TO FUND YOUR INNOVATION

Presented Alex Popa, Partner, Boast CapitalDevFestYVR February 21, 2015

OUTLINE

I. What do I need to know about the SR&ED

program?

II. How can I apply the SR&ED program to product

and process development in the real world?

III. What does the SR&ED claim process look like?

IV. How can I make this source of funding more

reliable?

V. What are some government grants available to

help lower the cost of building a product?

I. WHAT DO I NEED TO

KNOW ABOUT THE SR&ED

PROGRAM?

WHAT IS SR&ED?

APPLICABLE INDUSTRIES

QUALIFYING CRITERIA

Must meet three criteria to qualify for SR&ED:

ELIGIBILITY

The CRA’s 5 questions:

1. Was there a scientific or a technological

uncertainty that could not be removed by

standard practice/engineering?

1. Did the effort involve formulating a hypothesis

specifically aimed at reducing or eliminating the

uncertainty?

Continued…

ELIGIBILITY

3. Was the adopted procedure consistent with the

total discipline of the scientific method,

including formulating, testing, and modifying the

hypothesis?

3. Did the process result in a scientific or

technological advancement?

3. Was a record of the hypothesis tested and

results kept as the work progressed?

WHO QUALIFIES?

SR&ED BENEFITS

Return rates for SME CCPCs:

SR&ED BENEFITS

Return rates for non-CCPCs:

DOCUMENTATION

Documented at the time the work was completed

Technical obstacles or challenges

Dated

DOCUMENTATION

Time Tracking

Financial

II. HOW CAN I APPLY THE SR&ED

PROGRAM TO PRODUCT AND

PROCESS DEVELOPMENT IN THE

REAL WORLD?

EXAMPLES

CASE STUDY

SME software company

in Vancouver (considered

a CCPC)

4 developers (1 front-end,

3 back-end)

Salaries are $75K per

year and 75% of time is

eligible

CASE STUDY

Front end development not typically eligible

Eligible expenditure pool for salaries would be $169K

($75K x 3 x 75%)

Proxy overhead method and CCPC rates of return

≅$109K worth of investment tax credits (ITCs)

USING SR&ED TO GROW

Since it’s an SME, ~109K of ITCs = $109K Cash

That’s $327K of ITCs

generated over 3 years

if the R&D expenses

remain the same.

III. WHAT DOES THE SR&ED

CLAIM PROCESS LOOK

LIKE?

READY TO CLAIM?

WHEN TO CLAIM?

18 Months Past Fiscal Year End

Current Claim = Within 6 mo

Amended Claim = Within 7 to 18 mo

TURNAROUND TIMES

From receipt of a complete claim:

CCPC Current Claim – 4 months

CCPC Amended Claim – 8 months

Non-CCPC Claim – 12 months

CRA REVIEWS

CRA Review ≠ Tax Audit

Multiple types of Reviews:

Desktop

Financial

Technical & Financial

First Time Claimant Advisory Service (FTCAS)

IV. HOW CAN I MAKE THIS

SOURCE OF FUNDING MORE

RELIABLE

THE DO’s

Do:

Pay yourself and staff

Start time tracking and proper

documentation now

Incorporate your company and

ensure clear IP ownership

THE DON’T’S

Don’t:

Underestimate the importance

of documentation

Focus on the business

opportunity

Leave your SR&ED claim until

the last minute

V. WHAT ARE SOME OF THE

GOVERNMENT GRANTS

AVAILABLE TO HELP LOWER THE

COST OF BUILDING A PRODUCT?

IDMTC

Products must either

educate, entertain, or inform

using at least two of the

following: text, sound, and/or

images.

Can recover 17.5% of

eligible salary and wages

incurred in the fiscal tax year.

Fully refundable tax credit

IRAP

IRAP = Industrial Research Assistance

Program

Provides SME’s with:

Grants to help commercialize innovative

technologies and products

Advisory services

Research & development assistance

IRAP – TECH PROJECTS

Funding between $30K- $300K,

matching 50-80% of total project

cost

Funding is determined by an

Industry Technology Advisor

(ITA)

Funding is non-repayable, as

long as the terms of the

Contribution Agreement are

adhered to

IRAP - BIAP

BIAP = Business Innovation Access

Program

Pilot program that will provide $20M in

funding over 2 years to help SME's

Examples of eligible technical services are:

Product optimization

Process development, analysis or optimization

Specialized testing

WINN

WINN = Western Innovation

Initiative

5-year federal initiative with

$100M in funding

Repayable, interest free loan

Funds up to 50% of eligible

project costs with a maximum

$3.5M/project and $7.5M to any

one organization

MITACS INTERSHIPS

Accelerate Research Internships

pair grad students and post-docs

with eligible organizations in their

industry of choice

Mitacs provides $7.5K and the

industry partner matches that

amount for a total of $15K

Cluster internships are also

available

WHO IS BOAST CAPITAL?

We are:

Highly reputable

Technology-

focused

Efficient

Well-connected

ALEX POPA

PARTNER

403 402 3388 | [email protected]

BoastCapital.com | @BoastCapital

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