INNOVATION
“It takes quite a bit of due diligence to make sure your project follows the rules. You have to prove you have a technological challenge, a way to overcome the technological challenge, and a way to test the solution.”
KELLY JAMES, P.ENG. Biomech Engineering Ltd.
The work performed isn’t necessarily in a lab or on a shop floor. An eligible project may literally be right in front of your eyes, on your computer. A qualifying computer simulation might test new methods to improve the accuracy of results, for example, or perhaps develop processes or techniques that are safer, more economical, and more environmentally friendly than existing ones.
WHAT CAN YOU CLAIM?
Companies are allowed to deduct SR&ED expenditures from their income for tax purposes — things like salaries, contracts, and materials — while the investment tax credit (ITC) can be used to reduce their actual income tax. Amounts depend on the company’s ownership and size. Generally, small CCPCs can claim an ITC of 35 per cent on qualified SR&ED expenditures up to an expenditure limit of $3 million. That amount is reduced if the taxable income is more than $500,000 and taxable capital more than $10 million for the tax year preceding the claim year. The ITC goes down to 15 per cent on qualified expenditures over the expenditure limit. For other corporations, individuals, and trusts, the ITC is 15 per cent of qualified expenditures. Most provinces add support to the SR&ED program. In Alberta, the government piggybacks on the federal program by providing an additional 10 per cent investment tax credit to corporations, to a maximum of $400,000. It is complicated, so businesses often hire consultants to help them review, prepare, or manage claims. Mr. James, for example, got help from Grant Thornton because he wanted to make the
72 | PEG FALL 2015
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