Have you ever wondered if you were taking advantage of all the benefits and tax credits offered to business owners?
The SR&ED tax credit, for example, is a program that incentivizes and rewards Canadian companies engaging in scientific research and experimental development. Unfortunately, many businesses have never considered claiming this tax credit because they don’t think their work qualifies for it.
Other business owners are sure their work could qualify but never claimed SR&ED because they think it would be too complicated. Don’t let this interesting opportunity pass you by. Here are all the reasons why you should apply for a business tax credit.
#1. Your Business Can Benefit in Different Ways
If your business is eligible, you could receive a tax incentive as a cash refund or even pool your expenses for more than one year to benefit from a tax deduction.
The money you receive will benefit your business and operations differently. You could be able to upgrade your equipment and your facilities to keep your business competitive, grow your revenue much faster, or simply have a nice financial cushion to help you go through hard times.
And if there is something you can be sure of as an entrepreneur, it is that hard times and challenges will come and that you will need money and ingenuity to face them.
#2. Many Businesses Are Eligible
Many business owners think that since they don’t run a scientific lab, their business is not eligible to receive SR&ED tax credits. This isn’t true at all.
No matter how big or small your business or industry is, you could be doing work that qualifies. However, your qualifying work might not concern all your work and could involve a few projects or a small part of your activities.
Are you working on finding solutions for different technological problems? Are you creating products or developing processes that should help propel your industry forward? Are you involved in research because your goal is to advance scientific knowledge?
If your answer to these questions is “yes,” your business might be eligible to receive SR&ED incentives. It doesn’t matter what industry you are in or whether or not you have been successful in your project.
#3. Not All Your Expenses Might Qualify
Now that you have determined that part of your work is eligible, you also need to know that not all your expenses might qualify for the SR&ED tax credit.
Eligible expenses include the materials transformed or consumed for your qualifying work, the wages of your employees who worked on your SR&ED projects, and subcontracting expenses. They also include overhead costs that help support your business without necessarily being linked to your SR&ED work.
On the other hand, expenses that will not qualify include sales and marketing, routine data collection, testing and maintenance, commercial production of a new or updated product, research in social science, and prospecting and drilling for petroleum or natural gas.
#4. It’s Important to Document Your Eligible Work
Your SR&ED tax incentive will not fall from the sky just because your work is eligible for it. You will have to claim those benefits, and you can’t simply wait for the end of the year to work on your claim.
You have to document your eligible work and expenses throughout the year. For each of your SR&ED projects, be sure to produce timesheets, test reports, and more. You must also keep prototypes and pictures related to your research and work.
If the Canada Revenue Agency decides to audit your SR&ED claim, the documentation you have gathered will help them make a decision.
#5. The Tax Credit You Might Receive Depends on Different Factors
The tax credit you might receive depends on the size of your business and the number of your expenditures.
If you are a Canadian-Controlled Private Corporation, you could receive up to 35% of your qualifying expenses through an investment tax credit. If your business is not a CCPC, this amount should be 15%.
#6. It Might Be Best to Let an SR&Ed Professional Handle Your Claim
The truth is that SR&ED is not as complicated as many entrepreneurs think. However, if you are not exactly sure if all your projects qualify, it would be in your best interest to let an experienced SR&ED professional handle your claim.
Remember that there could be a lot of money at stake and that this money will not be handed to you if you do nothing. To make the most of the SR&ED program, be sure your claim is, at the very least, reviewed by an expert before submitting it.
This is the best way to ensure you are claiming all the money you are eligible to receive without forgetting anything.
