R&D Tax Credits
What Are R&D Tax Credits?
R&D tax credits are given by the Canadian government to encourage companies to undertake industry advancing projects that have financial risks. These Research and Development tax credits allow businesses of all sizes to advance technology, processes, or other aspects of one’s business, through a controlled and well documented program.
Are R&D Tax Credits Different From SRED Tax Credits?
R&D tax credits are the same as SR&ED tax credits, however R&D tax credits are the older name for the government program. Before 1986, businesses perceived the R&D tax credit program as a tax credit for businesses working in a lab environment making new scientific discoveries, when in fact this program was meant to keep Canadian businesses innovating from the very beginning. In 1986 the government changed the name of the program to “Scientific Research & Experimental Development”, which further allowed for clarity into the true purpose of the program. Oddly enough, many businesses today are still oblivious to the fact that their business may qualify for this government incentive program!
Why Are There So Few Businesses Using the SRED Program?
There are two answers to this question.
- There is still a misconception among many business owners and corporations about not fulfilling the criteria for a SRED claim.
- Business owners and corporations simply don’t know about the program.
Unless a business owner or a corporation gets in touch with a SRED consultant to discuss the possibility of putting together an SRED claim, they shouldn’t be speculating on the merits of their claim. Instead, they should contact a SRED consultant, get a complementary discovery session, and hear it from the professionals if they have a valid project for an SRED claim. This is the only want to know if your business or corporation is eligible for the tax credit program.
Another area of weakness in the industry is in the knowledge of business owners and corporations about the SRED tax credit program itself. Many educated professional simply do not know that this program exists, and that there are consultants that work strictly on contingency. This means no risk and full rewards for companies that are eligible for SRED credits.