Finance Seminar Notes - August 8
This seminar was for round 3 finalists only, but we’re happy to share notes.
Canadian Scientific Research and Experimental Development Program (SR&ED) - Jacqueline Gustafson, KPMG
SR&ED (pronounced “shred”) is a federal program supporting industrial research and development. It is administered by the Canadian Revenue Agency. Over $2 Billion in tax credits granted annually. 70% claimed by small and medium business. 500 CRA employees supporting it.
Claim Package:
- T661 form
- Technical Report
- T666 (in BC)
- Schedule 31
What qualifies? Salaries and wages for employees directed engaged in R&D (specified employees must have a 10% interest). Materials consumed for R&D. Contract payments, third part payments, and lease costs. Capital expenditures and overhead expenditures.
Q: Lets say you create a machine as a prototype, but then it goes on into production use?
A: You may have to pay some of the money back for the capital expenditures of the equipment.
Q: Can it included office space or land space?
A: Yes, in some cases.
What does KPMG do? Identify eligible activities and costs. Preparation of technical and financial information. Assistance in CRA audits; audits are not uncommon as they basically just want to ensure you exist and are legitimate. KPMG also has lines with industry and technical specialists. Fees are on a contingency basis.
Three criteria must be met to be eligible: scientific uncertainty, technical content, technological advancement. There are various guidelines that are unclear.
Q: Can you claim past expenses?
A: Yes. You have 18 months to claim after your last fiscal year end.
Q: Can you charge for a prototype or beta product and still qualify?
A: Yes.
Q: Can overseas work count?
A: No, only work done in Canada.
Q: Partner in Boston, wants to set up R&D shop in Vancouver, can that qualify?
A: Yes, it can qualify but at a lower rate.
Webnames Experience with SR&ED - Stephen Smith
In your first year, you very likely will be audited. First, identify projects that may be eligible up front. Have developers keep rigourous time sheets. You may not realize that a project is eligible at first. “More upfront work is better than less.”
They describe the work in about one page per project: description, objectives, tech or knowledge level, scientific advancement, description of work undertaken, and supporting information.
NRC-IRAP, National Industrial Research Assistance Program - Julia Rylands
“We don’t have any month left his year” Keep in mind for next April. There’s a huge demand across the country for funding. Although known for giving money, about 70% of their time is spent giving advice.
Q: How are funding decisions made?
A: Generally, first come, first serve, but in cases of having a limited pool,
Q: When is the best time to apply?
A: The earlier the better. Preparation work takes time. You can submit now, and be ready for next year.
Unlike SR&ED, they don’t fund retroactively. Contributions are targeted towards companies that: demonstrate a technology oppourtunity, have a clear business case, have a desire and potential for growth, demonstrate financial and managerial capacity to bring the concept to market. Project types: R&D (up to $500K), market assessments (up to $15K), diagnostic (up to $15K), and youth hire (up to $15K). Company must be providing at least 50%. “Not a grant program, but a contribution program”. Requires the same amount of record keeping as SR&ED.
Q: What is your definition of a startup and a small project?
A: Between 0-20 employees, $10,000 - $25,000 and up.
August 28th, 2008 at 12:35 pm
By utilizing sr&ed tax credits and gathering sr&ed tax credit information companies can receive funds which will allow them to invest further in research and development. This benefits the company as well as the economy as a whole since this work may not have been undertaken without this infusion of money.