Earning SR & ED tax credits
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| Presenter Martin Vines explains key points of the program. | Scientific Research & Experimental Development – SR & ED – wasn’t
always associated with the art of moldmaking. Today, thanks
to Revenue Canada tax rebate programs, it’s a key component
in many tool shops’ plans, as they look for any opportunity
to improve the bottom line.
The big question is, what is research or development, and
how does Revenue Canada determine that? A CMTDMF information
session on this, held at Windsor’s
Ciociaro Club on November 29, clarified most of the answers.
A group of Revenue Canada staff came to explain different
aspects of the program Martin Vines, national technology
sector specialist for plastic, outlined the main points,
explaining that a lot of variables come into the picture.
This is especially true because each tooling job is going
to be unique.
“The ‘oops’ type of project is one of the most common that
comes up,” he said, “when something that’s
supposed to be routine isn’t. Your usual technologies
don’t work in this particular circumstance.
This accounts for the majority of the projects we see.”
In many cases, he stressed, the key phrase in assessing
a claim in advance will be “It depends.” Revenue
Canada can provide a provisional appraisal of a claim once
the work has been done, and this can be done within two months
of completion. But it doesn’t offer such appraisals
in advance of work beginning, since a customer can change
his mind, or a project can change direction mid-course
“We will cover unsuccessful attempts at SDR & ED,” Vines said, “and
success in the project is not a criterion, as long as you
clearly demonstrate you were attempting to make a technological
advancement.
The moldmaker has to establish technological
advance is necessary for the project in hand, either because
of cost constraints, or because of the uniqueness or complexity
of the job. Various items can be included for a tax rebate,
including machinery or software acquired specifically for
the project. Other criteria that are considered include:
- The mold is built only for experimentation and will
not be sold.
- It uses a new mold material, or an insert from a more
conductive material.
- It has special mechanisms or instrumentation on it.
- It’s a complex mold with many functions.
- The geometry of the mold is significantly different to
anything done before.
- Part of the job is technically unique. This might be a
small unique feature on an otherwise standard mould.
Documentation for all this can be compiled separately,
but normal business documentation, including invoices or
payroll records, can be considered. This is particularly
necessary in jobs that seem conventional, but are found to
turned into research projects halfway through.
“You have to demonstrate things are being used in significantly different
ways to what has been used before,” Vine said. “But SR&ED can
start and stop at any time in the process. It’s not the whole process,
and doesn’t have to be.”
The event was attended by over 50 people from toolmaking
firms, from Windsor, Toronto and points in between.
After the seminar section, there was a workshop where attendees
broke into three groups to discuss a technical problem involving
a high-polish mold for automotive using a new grade
of steel. People had an opportunity to look at what might
qualify for a tax rebate, and what would not.
Key issues
for toolmakers that came out of the session were timeliness
of response to their requests for appraisals, and also the
uncertainty factor. While Revenue Canada’s SR & ED
staff are all technically trained, there is no guarantee
they will allow all projects, or all aspects of a project
that are claimed. A toolmaker might have to appeal a ruling
in order to earn the rebate, and the entire process can take
a period of many months before a cheque is finally issued.
In sum, SR & ED credits are not a form of instant cash. They are, though,
a valuable incentive for moldmakers to venture into unexplored territory, and
to take on projects that require more than the usual level of risk.
www.cra-arc.gc.ca/taxcredit/sred/
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| One of the workshop groups studies its SR & ED options. |
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