5 questions to ask: Is our work SR&ED eligible?

Navigating the Scientific Research & Experimental Development (SR&ED) program can be tricky, and it’s important to ensure you’re not leaving money on the table. Where do you even begin?

Asking yourself these five key questions now can help you get a base understanding of whether the kind of work you’re doing might make you eligible for the SR&ED tax credit program:

1.       Are standard practices falling short?

New realities drive a need for new solutions. Whenever existing scientific or technological knowledge or experience can’t help achieve a specific objective, you may just have the right business case for making use of SR&ED investment tax credits. That’s also true when technology shortcomings or limitations prevent you from developing a new or improved process. In other words: if current state knowledge or technology isn’t up to the task of resolving a problem, the work you do to try and develop a solution could be SR&ED eligible.

2.       Does your work reduce or eliminate uncertainty?

Understanding is the basis of all innovation. That’s why building a hypothesis is a critical step in resolving scientific or technological uncertainty. Read: your hypothesis is the starting point that unleashes your investigation to prove – or even disprove – an idea. When you’re creating a hypothesis to resolve scientific or technological uncertainty, that work could result in the SR&ED tax incentive eligibility.

3.       Is your disciplined approached grounded in the scientific method?

The way you approach problem-solving counts. For innovation to fall into the realm of SR&ED eligibility, your planned approach must connect the essential elements of the scientific method. That includes formulating hypotheses designed to reduce or eliminate uncertainty; testing those hypotheses through experiments or analyses; and developing logical conclusions based on the results. For the work you’re doing to qualify for SR&ED tax incentives, your team of qualified science, tech and engineering experts will need to be following the scientific method every step of the way.

4.       Did your process lead to scientific or technological advancement?

Better information can cultivate deeper understanding. If your work results in a better understanding of technology or scientific relations, , it can have useful impacts on situations well beyond your current project. What you learn along the way may that doesn’t lead to the answer you were looking for may still propel your work into the realm of SR&ED eligibility. That’s because showing why a possible solution would not work can count as advancement – even without meeting your project’s original objectives. Rejecting a hypothesis is advancement because it eliminates a possible solution.

5.       Are you keeping good records?

The devil’s in the details – especially where innovation’s concerned. For your work to qualify for SR&ED tax incentives, you’ll need to keep complete records of the hypothesis, tests and results. Eligibility depends on records that clearly show why each major element of the process was required, and how each fit into the project as a whole. Being mindful of metrics is also important. You’ll be expected to show which indicators and measures you used to analyze your work. That ties into how you test, too. Your progress is built on analyzing results from one step to the next, including testing in a systematic way and organizing records of the work you do at the experimentation or analysis stage. That data is the basis for capturing, communicating and even repeating the work that drives the kind of scientific and technological advancements SR&ED program administrators are looking for.

If you’re creating or improving products and processes, the innovation you’re driving could make your work eligible for SR&ED investment tax credits. From labour and materials to subcontracting fees and third-party payments: so many aspects of your project might qualify. Will you get lost in the sea of opportunity, or unlock new funding to drive future growth?