Scientific research and Experimental Development (SR&ED) also known as the SRED tax credit is a text incentive available to all Canadian businesses. Whichever the size or the sector your business is in Canada you are eligible for this type of incentive. This article focuses on all you need to know about SR&ED sred credits.
WHAT IS SR&ED?
If you conduct any research or development in Canada then your business is eligible for a tax refund, tax reduction on incomes, or even investment tax credit by SRED. With the struggle and setbacks that the COVID-19 pandemic is inflicting on businesses right now, claiming an SRED sooner would help you or your business receive credits faster for the Canadian government has now quickened the process by reducing the time spent reviewing the claims.
SRED TAX INCENTIVE PROGRAM.
Although tech companies are the ones who claim this tax incentive more often, you need to know that any individual, trust, or partnership can claim the tax credit as long as it has conducted research and development to aid in achieving technological and scientific advancement.
The Canada Revenue Agency stated earlier that your business is sheltered by the Umbrella of SRED if it is doing an investigation or research through experiments to advance science.
CLAIMING THE SRED TAX INCENTIVE.
First of all, all the work should be done on Canadian soil. For one to maximize the eligible returns, one should understand well the expenditures which you should pay close attention to when claiming. One of the most critical expense is the payroll expenditure. The payroll includes total salary plus all taxable benefits even the bonus. And this applies to all the employees who are either overseeing, managing, or directly performing the work.
Why do managers get paid yet they aren’t doing the work? They qualify for they invest their time together with all the senior leadership for they guide and supervise the project.
THE PROCESS OF CLAIMING.
For the CRA to process your claim faster, you should keep your books clean and organized. To support your claim, the work should be well documented with timesheets and contracts, planning documents, and progress reports.
When making your SR&ED expenditure claim, you should file within 12 months of the filing due date of the businesses’ income tax return.
THE BENEFITS OF SRED.
As long as the government of Canada approves your claim of the tax incentive, your business would benefit: either it can deduct the SRED expenditures against its total current income or it can use the investment tax credit provided by SRED to reduce its income tax payable.
The Science Research and Experimental Development have helped to motivate businesses to venture into science research making Canada a technologically advanced nation.