Save Tax and Streamline Your Business with SR&ED and Preventive Maintenance

What are SR&ED tax incentives

The Scientific Research and Experimental Development (SR&ED) program utilizes tax incentives to support Canadian businesses of all sizes and in all sectors to conduct research and development in Canada.

There are two main benefits of the SR&ED tax credit:

  • You can pool your SR&ED expenditures and deduct them against your current-year income or keep them and deduct them in a future year.
  • You can earn the SR&ED Investment Tax Credit (ITC) and use it to reduce your income tax payable. In some cases, the Canada Revenue Agency (CRA) can refund the remaining ITC.

Whatever eligible SR&ED work you are doing, your investment tax credit will be at least 15% and can be as much as 35% of your qualified SR&ED expenditures. If you have any unclaimed ITCs, you can carry them back 3 years, or forward 20 years and apply them against tax payable for other years.

Incentives utilized by Corporations, Individuals, Trusts, and Members of a Partnership in Canada.

Canadian-Controlled Private Corporations

Generally, a Canadian-Controlled Private Corporation (CCPC) can earn a refundable ITC at the enhanced rate of 35% on qualified SR&ED expenditures of $3 million. You can also earn a non-refundable ITC at the basic rate of 15% on an amount over $3 million.

However, if you are a CCPC that also meets the definition of a qualifying corporation, you also earn a refundable ITC at the basic rate of 15% on an amount over $3 million and 40% of the ITC can be refunded.

Other Corporations

You can earn a non-refundable ITC at the basic rate of 15% on qualified SR&ED expenditures. You can use the ITC to reduce tax payable.

Individuals Proprietorships and Trusts

Individuals proprietorships and trusts can earn a refundable ITC at the basic rate of 15% on qualified SR&ED expenditures. You must apply the ITC against tax payable before the CRA can refund 40% of the unclaimed balance of ITCs earned in the year.

Members of a Partnership

As a partnership is not a taxpayer, you cannot earn an ITC.

Typically, the ITC is estimated at the partnership level then allocated to eligible members.

How to Qualify for SR&ED Tax Incentives

To qualify as SR&ED, the work must be conducted in Canada and must be either; basic research, applied research, or experimental development.

Basic research

This is the work done to advance scientific knowledge without a practical application.

It is usually done in universities or research institutions.

Applied research

This is also work done to advance scientific knowledge, but, unlike basic research, it is done with a specific practical application in mind.

Experimental development

This work is performed to achieve technological advancements.

It is also by far the most common type of SR&ED work:

  • It means that you are generating data, or information in order to advance your scientific or technological knowledge base. This will help you to develop new products or processes and improve existing ones.
  • Developing or improving on something new doesn’t always mean that a technological advancement is being sought after. Ask yourself, what technological uncertainties did I encounter when I tried to develop or improve the material, device, product, or process?

The SR&ED work must be a systematic investigation through experimentation and analysis. This means that each approach you take to resolve your uncertainty should be a planned experiment based on an idea or a concept.

You start with a problem that you cannot solve with your existing scientific or technological knowledge base. Then you suggest new ideas for solving that problem and test them. This will eventually increase your scientific or technological knowledge base.

Generally, work qualifies as SR&ED if you are doing a systematic investigation through experiment or analysis in order to advance science or technology.

The following types of work are not SR&ED:

  • Style changes.
  • Routine data collection.
  • Market research or sales promotion.
  • Research in social sciences or the humanities.
  • Quality control or routine testing of materials, devices, products or processes.
  • Commercial production of a new or improved material, device, product or process.
  • Prospecting, exploring or drilling for, or producing minerals, petroleum or natural gas.

What Expenditure Can Be Claimed?

You can claim expenditures incurred for the SR&ED work performed in the year.

SR&ED Tax Incentives

These may include expenditures for:

  • Materials
  • Overhead
  • SR&ED Contracts
  • Salary and Wages
  • Third-party payment

When calculating your SR&ED expenditures, you must use either the traditional method, or the proxy method when you fill out Form T661. Once you have chosen the method for that year, you cannot change it.

The traditional method involves identifying the overhead cost incurred pertaining to SR&ED work. The proxy method involves using a formula based on expenditures for salary and wages to calculate a substitute amount for SR&ED overhead and other expenditures.

What is Preventive Maintenance Software?

Preventive maintenance software streamlines every aspect of preventive maintenance, which includes development, scheduling, and tracking. By helping maintenance departments isolate small issues before they grow into big problems, the software cuts downtime and ultimately increases profits.

Why should you Use Preventive Maintenance Software?

Without it, you’re only reacting to problems rather than solving or developing a workaround. Without a solid PM program, you’re left relying on run-to-failure and on-demand work orders. Arranging resources and managing inventory is challenging when you can not plan beyond the next occurrence of a breakdown. 

Preventive maintenance software is a core part of CMMS which helps you develop, schedule, and track PM programs that cuts downtime and boosts asset and equipment life cycles. Data-packed preventive maintenance work orders include everything technicians need, including customizable step-by-step instructions, associated parts and materials, digital copies of Operation-and-Maintenance manuals, and digital images and schematics.

If your organization is currently dealing with maintenance issues, chances are you are at risk of incurring high maintenance costs and increased downtime. Which means it’s time to switch to a more reliable maintenance strategy.

Preventive Maintenance software enables organizations to generate work orders, set up schedules and monitor them, making it easy to prevent equipment downtime and increase asset lifespan. Thus not only helping you to get rid of unexpected repair but also helping you boost profits and overall efficiency in your business.

If you’re looking to boost your facilities management and maintenance operation as efficiently as possible, it’s essential that you implement the use of preventive maintenance software.

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