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This webinar was hosted by Boast Capital on April 23, 2014. The following slides cover: -SR&ED Overview -Industry Examples -Recoverable Amounts & Qualifying Expenditures -Program Changes -Financial & Technical Tracking -Timeframe for Claiming -CRA Reviews -About Boast Capital If you have any questions or would like further clarification about the tax credit program, please email us at [email protected] or visit our website for more info: www.boastcapital.com
Citation preview
Everything You Need to Know to Claim SR&ED Tax Credits
BoastCapital.com | @BoastCapital | BoastCapital.com/blog
Agenda
1. SR&ED Overview
2. Industry Examples
3. Recoverable Amounts & Qualifying Expenditures
4. Program Changes
5. Financial & Technical Tracking
6. Timeframe for Claiming
7. CRA Reviews
8. About Boast Capital
BoastCapital.com | @BoastCapital | BoastCapital.com/blog 2
What is SR&ED
Scientific Research
Experimental Development
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• Technology Advancement Sought
• Technology Uncertainties/Challenges
• Technical Content (Iterations)
Identifying SR&ED Eligibility
5BoastCapital.com | @BoastCapital | BoastCapital.com/blog
Industry Examples
BoastCapital.com | @BoastCapital | BoastCapital.com/blog
Industry Examples
BoastCapital.com | @BoastCapital | BoastCapital.com/blog
Industry Examples
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What Can be Claimed
• Salaries *• Overhead (Traditional vs. Proxy)• Sub-Contractors * (80% of expenditure)• Materials (Transformed or Consumed)• Capital Expenditures (Expired Dec 31, 2013)
* Work must be carried out in Canada (10% allowed outside of Canada/preformed by Canadian Tax payers)
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Recoverable Amounts
CCPC – Refundable ITC’s
•Salaries – ~64%•Sub-Contractors - ~32%•Materials - ~40%
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Recoverable Amounts
Non-CCPC – Nonrefundable ITC’s
•Salaries – ~36%•Sub-Contractors – ~18%•Materials – ~28%
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Percentages Breakdown
CCPC Non-CCPC
Federal Percentage 35% 15%
Provincial Percentage 10% (Alberta & BC) 10% (Alberta & BC)
Refundable YESFederal –NO
AB Provincial – YESBC Provincial - NO
Totals Up to 64% Up to 36%
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RateCCPC
Refundable?
Other Corporations Refundable? Expenditure Limit
Alberta 10% Yes Yes Up to $4M in expenditures
British Columbia 10% Yes No Up to $3M in expenditures
Manitoba 20% Yes [1] Yes [1]
New Brunswick 15% Yes Yes
Newfoundland and Labrador 15% Yes Yes
Northwest TerritoriesNova Scotia 15% Yes Yes
NunavutOntario
Business research institute tax credit (OBRI) 10% Yes Yes Up to $20M in expenditures
R&D tax credit 20% Yes Yes Up to $3M in expenditures
(ORDTC) [8] 4.50% No No Up to $3M in expenditures
Prince Edward IslandQuebec
R&D Wage Tax Credit
17.5% or 37.5%] Yes [2] Yes [2]
University, public research center and research consortium tax credit 35% Yes Yes
Private partnership tax credit 35% Yes Yes
Saskatchewan 15% Yes No
Yukon 15% Yes [3] Yes [3]
[1] - Partially refundable - 50% - for in house expenditures and 100% refundable for eligible contractswith a qualified research institute
[2] - Quebec Canadian-controlled corporations with less than $50 million* in assets, on an associatedbasis, can claim the 37.5% rate on up to the spending limit of $3 million* of R&D wages, on anassociated basis. For those with assets between $50 million* and $75 million*, the 37.5% rate isgradually reduced to 17.5%.** The rate is 17.5%** for all other taxpayers. 50% of payments to arm'slength subcontractors are eligible for the credit. All thresholds are in respect of the previous year, ona worldwide associated basis.
[3] - 15% of eligible expenditures made to Yukon College only
No provincial R&D tax credit
No provincial R&D tax credit
No provincial R&D tax credit
Provincial R&D Tax Credits
Provincial Amounts
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Recent Program Changes
• Eliminate capital expenditures For expenditures incurred after Jan 1, 2014
• Lower the overhead proxy amount Current 55% ( was 65% in 2012 and 60% in 2013)
• Lower % of subcontractor payments Currently 80% (was 100% before Jan 1, 2013)
• Lower federal SR&ED rate for large corps. Currently 15% (was 20% before Jan 1, 2014)
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Financial Tracking
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Technical Tracking
Documentation should be:
•Contemporaneous •Dated•Highlight technological obstacles/challenges
BoastCapital.com | @BoastCapital | BoastCapital.com/blog 21
Technical Tracking
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How to File
• Complete the T661 form (Sch. 32)• Complete T661 Part 2 form (Sch. 60)– For each project claimed
• Complete the provincial forms– AT1 Sch. 9 and Sch. 9 List in Alberta
• File completed tax return electronically
BoastCapital.com | @BoastCapital | BoastCapital.com/blog 23
Time Frame for Claiming
18 Months past the fiscal year end
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Claim Turnaround Time
From receipt of a complete claim:
• Current filing (CCPC) – 120 days
• Amended filing (CCPC) - 240 calendar days
• Non-Refundable (non-CCPC) – 365 days
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CRA Claim Review Process
• CRA SR&ED review division– Reviews ONLY SR&ED expenditures and technical
content (not the company's FS, etc.)
• 4 types of CRA reviews– FTCAS (First Time Claimant Review)– Desktop– Financial only– Technical & Financial
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CRA Review Likelihood
• Expenditure makeup– Large subcontractor expenditures– Large materials/capital/lease expenditures– High percentage of specified employees being claimed
• Claim size– Relative size ($100K+ in ITC is likely to be reviewed)– Expenditure size as % of overall company expenditures
• Date of last review– Reviews are likely to occur every 4/5 years
• Significant increase in ITC’s claimed year over year
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Dealing with SR&ED Receivables
•Use professional judgment on the likelihood of receipt and treat like any other AR
•Claimant history and SR&ED claim makeup dictate CRA audit risk (AR risk)
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Who Should Claim
1. Financial Risk
1. Technical Direction of Project
2. Results of the research - IP Ownership
1. Contract for services vs. goods
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About Boast Capital
• R&D Tax Credit Consulting Firm– Calgary, Vancouver, Silicon Valley
• Events – Innovation Funding Seminars, Next Event May 13, 2014 in conjunction with CED
• Writing – Oil & Gas Magazine (OGM), Calgary
Herald Startup of the Week, Techvibes
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Boast Capital Work
• Industries of Expertise– Oil and Gas Services– Software Development & IT– Manufacturing– Agriculture– Bio Tech
• Contingency based work• Invoice on a percentage of ITC’s received by
company
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Boast Capital Team
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Contact Information
Jeff Christie – VP Alberta and Prairies 403-589-2809
James Suk – Partner
604-779-7770
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Questions or Comments?
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