Available Tax Credits for Research and Development

 

Running a business is like taking a trip in a car.  You pick a destination, plot your course and then set out on the road.  Along the way, you manage the inevitable delays, roadblocks and detours that present themselves as obstacles.  Successful drivers know that as along as you have fuel in your tank, you still have a better than average chance of arriving at your destination.  In business, money is the gas in your tank that keeps you moving forward.

 

Besides controlling expenses, increasing revenues and managing cash flow, the most important thing that you can do to keep money in your business is to take advantage of all of the tax credits available to you within your industry. In short, tax credits are money refunds from the government to your business. There are several credits and incentives available to businesses in Ontario that help to offset things like research and development (R+D).  R + D is one of the most expensive investments that a business can make, while at the same time, it can be the difference between a thriving, cutting edge business that grows or one that reaches a point of stability before becoming stagnant and then dying.

 

Simply put, decreasing your tax liability by taking advantage of all of your available credits means that, while remaining tax compliant, you get to keep more money in your business when the Canadian tax season rolls around.  

 

In Canada, companies focused on technology and innovation may be eligible for Scientific Research and Experimental Development (SRED) tax incentives.  As an inducement to innovate and focus on R+D, federal and provincial tax refunds may be available to these businesses during the SRED phase.  To qualify, however, a company must meet certain criteria as defined by the Income Tax Act of the Government of Canada.  SRED, as defined for income tax purposes is as follow:  “scientific research and experimental development means systematic investigation or search that is carried out in a field of science or technology by means of experiment or analysis and that is; basic research, applied research or experimental development”.

 

Flow CPA professionals are experts at guiding you through the application process which can be daunting and beyond the abilities of most business owners.  Without the guidance of a professional, it is likely that you are leaving money on the table that could (and should) stay in your business to help in day to day operations as well as for growth.

 

Of utmost importance to a successful application is that a business maintains accounting and bookkeeping records consistently, throughout the year.  Thanks to today’s high tech environment, the automation of smart accounting procedures and the use of cloud based data collection and storage apps like Hubdoc and bookkeeping programs like Xero, it is easier than ever to do.  

 

A driver that heads out on the road without a map or GPS, runs a high risk of getting lost and running out of gas.  In the same vein, a business that is striving to maximize net profits by taking advantage of tax credits and incentives needs the guidance and technical expertise that we provide.  From discerning the SRED credits information that is readily available, to the technical submission of an application, we provide advice and counselling to determine your eligibility, which could amount to as much as 40% of the total cost of research.

 

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