SR&ED Program To Carry On
On March 29, 2012, the Federal Minister of Finance, Jim Flaherty, presented the 2012 budget titled "Jobs Growth and Long-Term Prosperity".
In recent months, there was considerable concern regarding anticipated cuts to the Scientific Research and Experimental Development (SR&ED) Program based on the Jenkins report and statements made by Prime Minister Harper at the World Economic Forum in Davos.
As hinted by Science and Technology Minister Gary Goodyear on March 6th at the Economic Club of Canada, the changes are more transformative than reformative.
In summary, the proposed federal budget changes will be phased-in as follows:
With the exception of capital expenditures, all other expenditures such as salary and wages, materials, overhead expenses and sub-contract payments remain eligible, albeit at reduced rates for large companies.
Interestingly, the government will also invest $6 million over the next two years to improve theadministration of the program through several measures aiming at improving the claim pre-approval process and the self assessment tool. Also, echoing some of the concerns in the recent Ombudsman report, the government will work with industry representatives to address emerging issues and enhance the Notice of Objection process to allow for a second review of scientific eligibility determination.
More direct funding
The government has announced $1.1 billion over five years, in the form of grants, most of which will be directed to National Research Council's Industrial Research Assistance Program, IRAP ($110 million /year). The remainder will be distributed amongst various new or existing programs, such as:
The budget also proposes to provide $400 million to help increase private sector investment in early stage risk capital, although the form of this support has not yet been determined. In addition, $100 million will be provided to the Business Development Bank of Canada to support venture capital activities.
SR&ED remains very generous
Despite the proposed cuts, the SR&ED Program remains the most generous incentive program available for Canadian companies, especially so when combined with the provincial R&D tax incentives. Its greatest attribute is that it provides broad based incentive through tax credits to all companies based in Canada that invest in R&D, irrespective of their size, industry sector or technology area, as long as they perform qualified R&D. In 2011, the SR&ED Program provided more than $3.6 billion in tax assistance to 24,000 companies.
Your consultant will be contacting you in case you have any further questions on how the proposed SR&ED changes affect you.
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