FAQ

Frequently Asked Questions:

1. Can my company claim both the Scientific Research and Experimental Development (SR&ED) tax credit and Ontario Interactive Digital Media Tax Credit (OIDMTC)?
2. If my company is not profitable and doesn’t pay taxes yet, is it still eligible for the SR&ED tax credit?
3. My project was completely unsuccessful. Can my company still claim an SR&ED tax credit? 
4. How long does it take to receive a refund once my SR&ED claim has been filed?
5. My company has received funding from the Industrial Research Assistance Program (IRAP). Can my company still claim an SR&ED tax credit? 
6. I just found out about the SR&ED tax credit program. Can I still apply for a credit? 
7. Most of the work done on research and development in our company was done by contractors. Can we still get an SR&ED tax credit? 
8. What if similar products to mine exist? Is our work still eligible for an SR&ED tax credit?
9. What is the deadline for submitting an SR&ED claim? How long do we have to apply?
10. If I submit a claim for SR&ED will it increase my chance of being audited?

 

 Answers:

 

Can my company claim both the Scientific Research and Experimental Development (SR&ED) tax credit and Ontario Interactive Digital Media Tax Credit (OIDMTC)?

You can claim both, so long as there is no overlap between the costs you’re claiming on the two tax credits. For instance, according to the OIDMTC’s FAQ page, you cannot claim labour costs for the OIDMTC if you have already done so for the SR&ED tax credit. You should claim the SR&ED tax credit first, as it usually has faster processing times and you will get a bigger refund. 

 

 

If my company is not profitable and doesn’t pay taxes yet, is it still eligible for the SR&ED tax credit?
According to the CRA, your company is eligible for a refundable SR&ED tax credit as long as it is a Canadian-controlled private corporation. Other corporations can earn a non-refundable tax credit that can be applied to income taxes.

 

 

My project was completely unsuccessful. Can my company still claim an SR&ED tax credit? 
Yes. Failed, abandoned or postponed projects all qualify, so long as you can show your company had the intent of making a technological advancement on the project. As the CRA notes, “The key point is whether the work has the characteristics to meet the definition of SR&ED.” The project, whether it was successful or not, must comprise “a set of interrelated activities that:

• collectively are necessary in attempting to achieve the specific scientific or technological advancement defined for the project by overcoming scientific or technological uncertainty; and
• are pursued through a systematic investigation or search in a field of science or technology by means of experiment or analysis performed by qualified individuals.”

 

 

How long does it take to receive a refund once my SR&ED claim has been filed?

For the most up-to-date information on how long it will take to process your claim, please refer to the CRA Service Standards page for SR&ED claims. As of this page’s writing, it can take four months to a year to process your claim. How long your claim will take to process depends on whether you have are fundable claim, a non-refundable claim, or either of these claims with adjustments made to it. The CRA is committed to meeting its service standards 90 percent of the time.

 

 

My company has received funding from the Industrial Research Assistance Program (IRAP). Can my company still claim an SR&ED tax credit? 

You can still apply for the SR&ED tax credit even if you have received IRAP funding. However, the IRAP funding will be deducted from the SR&ED credit you receive. 

Use our SR&ED calculator to find out how much you could receive in SR&ED tax credits. Insert the amount of IRAP funding (and any other government funding) you have previously received into the “Government Assistance” section.

 

 

I just found out about the SR&ED tax credit program. Can I still apply for a credit? 

Yes, you can – but there are limits to the period of time in which you can file. According to the CRA, the reporting deadline is 18 months from the end of the tax year in which you incurred the expenditures if you are a corporation. Individuals have 17.5 months to file their claim.

 

 

Most of the work done on research and development in our company was done by contractors. Can we still get an SR&ED tax credit? 

It depends. The CRA says that the Canadian contractor must be at “arm’s length” from the company –for instance, you must not be related to the contractor or have any control over them – and you must have ownership of the work being claimed.

 

 

What if similar products to mine exist? Is our work still eligible for an SR&ED tax credit?

Maybe. The SR&ED program focuses on developments within a business context. So long as the product you are developing already has not been created in an open-source fashion, the CRA should examine how your business process met the project’s goal. That process is proprietary in nature and exclusive to your own business. That means that two different companies might be trying to obtain the exact same result, but will do so in different ways that are unique to each company.

Also, the CRA notes, “Development work is based on the application of the existing scientific or technological knowledge base, such as directly adapting a known engineering or technological practice to a new situation, where there is reasonable certainty of meeting the technological objectives.” As you can see, you can build new projects off the existing technological or scientific knowledge base to adapt it to a new situation. So if your project is based on something that exists, but adds something to it, it should qualify for an SR&ED tax credit.

 

 

What is the deadline for submitting an SR&ED claim? How long do we have to apply?

According to the CRA, the reporting deadline is 18 months from the end of the tax year in which you incurred the expenditures if you are a corporation. Individuals have 17.5 months to file their claim.

 

 

If I submit an SR&ED tax credit claim, will it increase my chance of being audited?

No. Reviewers of the SR&ED program are completely separate from those who perform normal tax audits at the CRA. These reviewers do not look at non-SR&ED aspects of your business.