SRED CRA or CRA SR&ED (SR and ED) is Canada’s tax incentive program to encourage Canadian technology companies to increase their spending on R&D activities. The program is administered by the CRA and it awards approximately $3 billion federally to 20,000 Canadian technology firms.
SR&ED is short for the Scientific Research and Experimental Development Program. The program is also often abbreviated SRED.
Each province in Canada contributes additional credits to companies for SRED work carried out within a particular province. The provincial SRED piggyback programs were harmonized with the federal program back in 2010 for all provinces except Quebec. Harmonization means that companies only deal with the CRA to receive all the federal and provincial credits they are entitled to. The CRA SRED program administers approximately $1B of these provincial credits annually.
Government R&D tax credits are available to qualifying Canadian corporations doing innovative work or solving technical challenges in their day to day work. It is administered by a standalone group within CRA. SRED is the biggest R&D credit program in the government and about 5 times the size of RESP credits disbursed.
Start-ups who have incorporated in Canada and who have staff on a regular payroll are a particularly well-served group under this program. Your qualifying expenses (payroll, prototype materials and qualifying subcontractors) attract credits at well over double the rates paid to large corporations. Also, all credits are paid to you in cash. You don’t need to show profits to qualify for SR&ED.
If you answer yes to any of the following questions, you probably qualify for funding:
The CRA SRED program is complex. Call G6 Consulting for a no-charge meeting where we can discuss your work and give you an experienced opinion on whether your work qualifies for SR&ED funding.
This example illustrates that new products and processes can be created using standard engineering techniques. Work of this type is not SRED because there has been no technology advancement vs a technological obstacle.
The CRA SR and ED program has been in place since 1986. The program is tweaked and modified periodically. The CRA announces program changes on a What’s New with SR&ED page located here: https://www.canada.ca/en/revenue-agency/services/scientific-research-experimental-development-tax-incentive-program/whats-new-program.html
The CRA SR&ED program rules are laid out in the Income Tax Act, ITA. The Income Tax Act is about 3,100 pages long. The SR&ED provisions are spread out across parts of 6 of those pages. The best way to file a SRED claim is as part of your regular corporate T2 filing. There are T2 schedules included in all the corporate schedules that let you file a SRED claim, specifically the T661, the Schedule 31 for federal credits and one or more provincial schedules depending on your province. In Ontario, a complete SRED filing package is composed of a t661, one or more t661 part 2 forms describing the claimed projects, a Schedule 31, a Schedule 508 and 566 for Ontario SRED credits and an amended Schedule 1 to account for SRED specific entries.
The CRA administers the SRED program out of 6 tax services offices across Canada, https://www.canada.ca/en/revenue-agency/services/scientific-research-experimental-development-tax-incentive-program/contacts.html If you’re in Toronto, your SRED office is located at 1 Front St W and their phone number is 1-833-446-0934. For Mississauga, Hamilton and Niagara customers, your SRED office phone number is 1-833-446-0929. If you have questions about the CRA SR&ED program you can phone your local SR&ED office and they will answer questions for you. Most offices don’t staff the phone number full time, so if you leave a message, the CRA will phone you back.
G6 Consulting Inc has over 12 years of experience specializing in the SR&ED program. SR&ED experts such as G6 often work on a contingency basis, with payment only based on a percentage of SRED credits once received. You can contact G6 for a free consultation here. https://www.g6consulting.ca/contact/