Overcoming the obstacles of R&D: a federal development tax credit can take your company to the next level.

• Author: Frape, Justin
• Position: COMMENTARY

I was exposed to two very different ends of the career spectrum as a small child. My father was an accounting professor, a numbers man with somewhat of an academic view of the world.

My grandfather, however, was an automotive mechanic and an entrepreneur; he had his own shop, and was forever tinkering with things and getting his hands dirty.

Never in a million years did I think my career would lead me to work in both of these spheres at the same time.

In my industry, I am known as an "SR&ED practitioner." I have spent the bulk of my career representing small businesses who seek assistance through Canada's Scientific Research and Experimental Development tax credit program.

Claimants of "SR&ED," or "shred" as it is commonly referred, quantify their research and development expenditures in the course of a corporate fiscal year. Upon review, the federal and provincial governments will assess refundable credits in excess of 40 cents for every dollar spent in R&D. If claimants don't use the credits against their taxes, the balance can be refunded in cash.

There is no limit on what the government hands out in SR&ED in a year, and companies can claim the credits for each and every year they have qualifying work.

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Many think the program is meant for folks with lab coats and microscopes. In practice, I find SR&ED comes from all walks of life. I've worked with farms that have developed new cropping and fertilization methodologies, companies that have improved the efficiency and accuracy of their manufacturing processes, to software developers that have pushed web architectures well beyond what might be considered typical practice.

"Beyond typical practice" is the key with SR&ED; there are things companies do every day where they know the precise outcome of their work and what to expect. SR&ED happens when companies look outside the zone of what they know and understand, when companies push the limits of their technology base and come up with something new.

When claiming SR&ED, one has to make the case that they couldn't just Google the answer. In order to move forward, one must experiment with alternatives to arrive at a new-found conclusion.

Notice two things: I make no mention of success or failure, and I make no mention of marketing. SR&ED is about acquiring new knowledge about a product or process. When experimenting, a company will learn how to do, or how not to do something.

Further, SR&ED takes no interest in marketing or...