Government Incentives

  • View
    22

  • Download
    0

Embed Size (px)

DESCRIPTION

Government Incentives. Growing your p rivate c ompany w ebcast series 9 April 2014. Meet the presenters. Denis Lajoie, CPA, CA Partner, EY SR&ED and Business Tax Incentives Practice, Toronto - PowerPoint PPT Presentation

Transcript

  • Government Incentives Growing your private company webcast series

    9 April 2014

    Presentation title

    Page *

    Meet the presenters Dharmesh Gandhi BScEng, MBASenior Manager, National BTI PMM LeaderLeads EYs PMM Government Incentives Practice to identify and access legislative and discretionary sources of government funds for our clients.Denis Lajoie, CPA, CAPartner, EY SR&ED and Business Tax Incentives Practice, TorontoLeader, Ernst & Youngs Scientific Research and Experimental Development (SR&ED) practice for Central Canada, which involves managing and working with a team of technical and accounting professionals in SR&ED client service, quality, and claim eligibility.

    Allan Bonvie, CAAssociate Partner, Tax ServicesCreator & Leader of Ernst & Youngs Capital Asset Review (CAR) practice.Allan and his team have completed over 130 CAR engagements in the past nine years, where these reviews have covered over $6.9 billion in capital expenditures resulting in over $181 million in client savings.

    Presentation title

    Page *

    AgendaSRED Legislative updateAdministrative updateOther IncentivesOther Incentive ProgramsCapital Asset Review

    Presentation title

    Page *

    SRED - Legislative update

    Presentation title

    Page *

    Legislative Update

    2012 Budget measures20132014Reduction in general ITC rate - from 20% to 15% (Note the ITC rate for CCPCs remains at 35%)XExclusion of all capital expendituresXReduction of prescribed proxy amount 65% to 55%X (to 60%)X (to 55%)Reduction in inclusion rate of arms length/payments for SR&ED from 100% to 80%XX

    2013 Budget measures20132014Additional disclosure of claim preparer informationX

    Presentation title

    Page *

    SRED - Administrative Update

    Presentation title

    Page *

    Eligibility Policy The SR&ED Policy documents released on December 2012 are based on Five Questions from Justice Bowmans Northwest Hydraulics case (98 DTC 1839) Applies for both scientific research in laboratories, and experimental development in all other venues, including software development The due diligence requiresWhy a scientific fact or technological ability exceeds prior limitations, including known adjustment methodsHow a new idea serves to close the gap How the work advances science or technology itself; not just for your needHow work is planned and organized, with development, testing and analysis; and How records and evidence support ideas tested and how results of trials determined next steps of work

    Presentation title

    Page *

    Eligibility Policy CRA outlines in the document why a project may not be eligible despite:New or expanded features or functionsSomething that has never been done beforeComplex challenges, requiring advanced technologyYour highly trained staff and contractors using specialized uncommon tools orKey required knowledge is held proprietary by others

    The Research and Technology Advisor expects a clear and documented basis for why:The claimant is CERTAIN prior technology is incapable, and how Evidence of a planned approach explores NEW idea analysis and experimentationThe same standard of proof applies for all work including laboratory studiesA new or improved product or process is not sufficient

    Presentation title

    Page *

    Eligibility Policy Increased emphasis on how the work was planned Problems during development or remedied with proven method are suspect Show how modifications for site conditions or specific variable exceed prior norms The systematic process recounts that a plan for the research was prepared Show work to exclude any prior conventional solution as due diligence, Show origin of the idea hypothesis to be studied, and Recount post-experiment analysis needed to decide next steps. Standard practice is excluded from eligible SR&ED

    Presentation title

    Page *

    SR&ED Audit Changes Audit changes speed up the process with intent of maintaining fairnessA more thorough basis of documenting why CRA allowed or disallowed claimsExtensive re-training of CRA staff and new tools and procedures, andInternal pre-audit stages have been altered for screeningCreation of initial standardized RFI Request for InformationExtended use of Joint Review by technical and financial reviewers Additional standardized forms of RFI and confirmation letters to specifically identify what is neededDeficiencies noted in fully audited projects generally to lead to costs disallowed in other projects The claimant must show evidence why conditions noted do not apply in other cases

    Presentation title

    Page *

    Other Incentives

    Presentation title

    Page *

    Range of incentive programsNon-tax legislated incentives: discretionary funds Examples include: Regional Development Fund NRCs IRAP Sustainable Development (SD) Tech Fund Non-tax incentives:grants and assistance Examples include: Hydro One, OPG, Union Gas, Consumers Gas, others. Tax legislated incentives Examples include:Capital Asset Restructuring and SegmentationDigital Media Tax CreditsApprentice Tax Credits Program

    Presentation title

    Page *

    Value of IncentivesCapital Asset Restructuring & Segmentation (>500K) Cold Storage/WarehousesData Centers Development Fund (>$1M) Windsor to Barrie and Niagara region Eastern of Toronto, north to Ottawa Digital Multimedia (outside of gaming industry) IRAP, SD Tech (>$500K) Green technology and environmental grants Training Grants

    Presentation title

    Page *

    Stage 1 Defining a planReview core objectives Determine grants and incentives that might apply Monetary value Timing, restrictions, risk, effort and availability of funds Optimizing portfolio of incentives Coverage of the expenses Determining overlaps that enhance your return Timing and resources required Audit requirements of funding agreement Developing a plan

    Presentation title

    Page *

    Stage 2 Putting the plan in actionEstablish completion milestonesConfirm timing and each applications requirementsCarefully review application guidelineSeek assistance Address overlap to ensure the best valueUse established templates for each initiativeFollow up and address any issues

    Presentation title

    Page *

    Capital Asset Review

    Presentation title

    Page *

    Why is there a CAR opportunity? Major construction, renovation projects distribution centres, manufacturing plants, refrigerated storage facilities, gas stations, grocery stores (corporate/franchise), office buildings, retirement homes, restaurants, hotels, auto dealerships, etc.Limited client personnel resources/capabilities to conduct detailed CAR (mostly EY time with minimal client time) Economic environment external financing is more difficultLimited taxation/capital asset accounting focus on project technical (engineering)Internal financing source - CAR

    Presentation title

    Page *

    Example CAR Savings/BenefitNet present value (tax shield benefit) of reclassifying $1.0 million of expenditures in 2014.

    Savings even more if reclassify prior years re higher rates pre 2012. Also, more savings depending on ownership structure.

    Presentation title

    Page *

    Benefits of CAR to Businesses Recurring savings application to future capital acquisitions; typically 2% to 4% of gross expenditures reviewedKnowledge transfer to client personnelMinimal time commitment client personnelMinimize income taxes by accelerating CCA claims (tax depreciation) and maximizing current tax deductions around capital expenditures

    Access other incentives SR&ED expenditures, training credits, M&P investment tax credits Access prior years asset classification opportunitiesMaximize Ontario, Saskatchewan M&P profits deductionUtilize CAR opportunities to offset CRA adjustmentsReduce level of bonuses to owner/managers

    Presentation title

    Page *

    Examples

    Presentation title

    Industry

    Type Client CAR

    CAPEX

    Client Tax Savings/ NPV Benefit

    M$

    M$

    %

    Manufacturing Plant Prefab Cement Products

    Reviewed construction/equipment costs

    21.8

    0.9

    4.1

    Perishable Goods Construction

    Dry / Refrigerated Facility audited & accepted by CRA

    32.1

    2.4

    7.5

    Commercial building

    New hotel construction/equipment

    42.0

    1.6

    3.8

    National Retailer

    Point of Sales Equipment

    94.0

    4.1

    4.4

    Aluminum Casting Plant

    Plant Construction Costs audited & accepted b y CRA

    73.0

    2.3

    3.2

    Chain Department Store

    Store Equipment CRA audited & accepted

    98.0

    0.95

    1.0

    Assisted Living

    Retirement home structure planning

    15.0

    0.5

    3.3

    Packaging Manufacturer

    Corrugated Box Plant Construction

    17.1

    0.65

    3.8

    Grocery Retailer

    New Store construction/equip.

    6.5

    0.25

    3.9

    Pulp & Paper

    Steam Reformer

    33.1

    1.1

    3.3

    140+ CAR ENGAGEMENTS COMPLETED

    OVER $7.8 BILLION IN CAPITAL EXPENDITURES REVIEWED

    CLIENT TAX SAVINGS/ NPV BENEFIT over $200M+

    Page *

    How to qualify a CAR opportunityHas the business incurred significant capital spending in the last 3-4 years or plans to in the current or next couple years? That is, $5.0-$20.0 million or more for one or 2-4 projects.Does a large portion of the capital spend include slow CCA/tax depreciation classes? Class 1 building, Class 13 leaseholds (with long amortization period for tax purposes), Class 17 parking, etc. [See Schedule 008 corporate tax return]Is the business taxable in the current,

Recommended

View more >