[pcc]

Really surprised by all the negative comments around (5) here.

With SR&ED its possible to get back a substantial amount (like 2/3) of the money you invested into development. Another way of looking at it, is that it's like doing your development at offshore rates, except working with local talent.

In fact, it self-propagates: Fund your initial development, get back a portion via SR&ED, use that toward development, get back a portion via SR&ED etc.

Our start-up has really benefited from this, and frankly I don't understand why any company (big or small) who has an eligible project would not apply for this.

It is actually reasonably easy to find out what CRA is looking for, by attending a CRA public information session or two, and then filling out the paperwork yourself. Consultants "increase the odds of success" purely because they understand what the CRA is looking for -- but it really is not that complicated and can be picked up easily just by going to an info session.

If you can't be bothered to spend the time doing it yourself, then who's to say its not worth giving up 25% of the 2/3 you could get back.

[wrath]

I totally agree the SR&ED is a huge plus for canadian companies. I've co-founded or been part of many successful startups in Canada and they were in part successful because of the SR&ED program. As long as you design and/or develop algorithms and software/hardware that improve canadian R&D you qualify for the service. $100k spent on the first year will give ~ $60K the next year, which you re-invest in R&D, and that gives you $36k the next (e.g. you double your origin $100k investment in two years), etc...

There's also the IRAP program from NRC which can be good. I've used it quite a few times for small projects. If you qualify for the program, IRAP will match your companies contributions up to a dollar amount, for the approved project.

[pcc]

Its also worth noting that SR&ED (specifically the ED part which is typically applicable to startups), only cares that you are seeking, systematically and in the face of technical uncertainty, for technical advancement within your organization.

They don't care whether the outcome of this search is successful or not.

This means you have the incentive to risk the funds on such an endeavour, as you can get the credit despite your success or failure.

Risk real money, and you'll get a refundable tax credit with a chq in the mail.

Risk "virtual" money (e.g. accrue a salary that you might only pay out later provided you have sufficient cash flow), and you get credits that can be carried and applied in years when you had/have real money.

One of the implications, is that if things end up going sideways, you still have the option to e.g. switch your startup to doing something else (like contract work), apply the old credits to the new money and recover something of your risk.

[debugging]

@pcc are there any limitations on how many employees you have? Can single founders apply?

[pcc]

In principle anyone with eligible work can apply. Its even possible for unincorporated individuals to claim SR&ED on personal tax.

I would recommend though that you go to one of the public info sessions held in your area, since there are various angles to be aware of, that will help you optimize your claim. For example:

- a small Canadian corp typically gets a better rate than a claim on personal tax;

- if you're a "specified employee" (meaning you own 10% or more of the corp) they place certain caps on things like how much of the "proxy amount" you can apply in your claim

- a lot of the claim revolves around how much of your expenses was for eligible work. You typically have to be careful that a founder who is also doing marketing etc, is only claiming for the portion of time spent on the R&D part.

They go into all of this in the public info sessions, and they typically have specialists from various SR&ED areas available to answer pretty much any question.

You can also call them on various info lines, e.g. they offer a "first-time claimant" service where they try to make it easier for people looking at doing a first SR&ED claim, even coming out to visit your business if helpful.

They also offer a "preclaim project review" service where they'll give you a prelim opinion on the eligibility of a project, without you having to file a formal claim. (While this is not guarantee, it can for instance be used while raising funding, to demonstrate to prospective investors that you have a reasonable expectation of getting SR&ED support).

In fact there are a lot of public info sessions coming up in the near future: http://www.cra-arc.gc.ca/txcrdt/sred-rsde/smnr-eng.html

[debugging]

Great thanks. What deters me is R&D, if someone wants to make a Saas web application, say something like basecamp, to me there isn't really much research required other than what is already publicly available in books/tutorials.

How can someone receive a grant for something like that? (Or do you have to fudge the truth?)