Canada promotes innovation through one of the richest scientific research and experimental development (SR&ED) tax incentive programs in the world. Credits of up to 35% of the development costs for new or improved products and processes are available from the federal government, and additional provincial incentives may also be applicable.
EY's Business Tax Incentives practice has helped clients realize more than CAD $4 billion in value for Canadian clients. In Canada, we have the largest dedicated incentives practice with more than 90 professionals across seven locations. Our team of experts can assist you to access programs such as:
We hire engineers, scientists, and accountants with deep industry experience who understand the technological advancements being sought and how to best approach your claims. A number of our professionals spent many years working for the CRA in the SR&ED program. Drawing on their experience and knowledge provides excellent insight from "the other side of the table". Every person on our team is a full-time SR&ED professional — we don’t “dabble” in SR&ED.
Whether you’d like advice on how to manage your claims in-house or wish to outsource the process entirely, a few hours spent with our team is a no-risk exercise that can reveal tax credit opportunities for current and the previous years’ activities.
With a proven track record and an excellent relationship with CRA, we execute well-documented claims so that you can take comfort in knowing that you have submitted your best claim possible. With the largest tax controversy practice in Canada, we can also help you defend your claim, whether we helped you prepare it or not.
We see the forest for the trees
Our industry professionals don’t just know SR&ED; they also know their industry focus areas, saving you time and seeing that you get the most out of the incentive benefits available to you.
We don’t dabble
We were the first fully dedicated R&D team in Canada, and this focus provides us with unique perspective on the program that we bring to our clients.
We will be your ally for the long-term
We will work hard to earn your trust because we believe in strong long-term relationships. In fact, we still work with our very first R&D client — who has consistently benefited from the SR&ED program, with no surprises.
We can help you through every step of the R&D lifecycle
We can scale and customize our services to meet your needs at every turn — from planning and managing the claim process to helping you file and even defend your return.
We share our global knowledge and experience with you
We are the most globally integrated firm out there, and that means our global R&D network can work together to provide you the most effective use of R&D benefits worldwide. EY is committed to serving industry leaders and supporting the achievement of their goals. As such our Business Tax Incentives team is the largest group of dedicated BTI professionals in Canada, and we will be flexible and nimble while providing you support with your Business Tax Incentives needs. The team consists of CPA’s, Engineers, Scientists and PhD’s who have a vast array of industry and CRA experience. This experience has resulted in an excellent reputation with the CRA and a high success rate for claims made. Our comprehensive methodologies, defence and advisory services will ensure that your companies succeed with your business tax incentives application.
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EY’s dedicated SR&ED professionals are leaders in the SR&ED space, helping companies get the most out of R&D tax incentives. Here are some of the services we provide to support you through the claim process.
SR&ED claim planning
Did you know the CRA prefers to see SR&ED claims structured according to the technology and not your product or process? We can work with you to plan your claim to meet this and other CRA preferences, helping to optimize your return on investment.
SR&ED claim process management
Choosing the right process model to demonstrate your eligible activities and costs is imperative to optimizing the value of your SR&ED claim. With experience in every industry and sector, we can recommend the process that will yield the most value with the least disruption to your business.
SR&ED claim preparation
We have the dedicated resources to focus on the unique issues and opportunities surrounding your claim; whether we write your project descriptions for you or support your team’s in-house preparations, we can help maximize your return based on your corporation’s tax history and projected taxable income, recommending strategies for using federal and provincial SR&ED incentives to improve on past results.
SR&ED Claim Tracking System
We also have dedicated team to proactively track your SR&ED claim status with the CRA. By obtaining monthly claim status updates directly from the CRA, we know the exact date for acceptance, Notice of Assessment issue date, cheque/refund release date and the exact amount of the cheque. If your SR&ED claim is selected for review, our team will also find out the contact information of the auditor and their manager.
SR&ED claim defense
The key to a successful SR&ED audit is to be prepared. We have a wealth of experience to help you focus on the issues that will support your claim and allay the CRA's concerns. We will guide you through the audit process, advise from the sidelines, or engage fully to defend audit together. Finally, we have additional avenues available at our disposal, such as filing for objections through EY Law, to maximize the audit results in an event where you disagree with the CRA's assessments.
Are you creating new products, developing new processes, or using new materials? If so, your business may be eligible to claim the SR&ED investment tax credit. In fact, many companies perform qualifying work without realizing it. EY can determine if your business is eligible. And even if you know you qualify, we can help you improve the yield and return on your claims.
If your organization is a proprietorship, a partnership, or a corporation carrying on business in Canada, you may qualify for a cash payment and/or credit against taxes payable.
Scientific or technological uncertainty means whether a given result or objective can be achieved or how to achieve it, is not known or determined on the basis of generally available scientific or technological knowledge or experience. Specifically, it is uncertain if the goals can be achieved at all or what alternatives (for example, paths, routes, approaches, equipment configurations, system architectures, or circuit techniques) will enable the goals to be met based on the existing scientific or technological knowledge base.
Technological uncertainties may arise from shortcomings or limitations of the current state of technology that prevent a new or improved capability from being developed. In other words, the current state of technology may be insufficient to resolve a problem.
Formulating a hypothesis designed to resolve the scientific or technological uncertainty is an essential step and requires observing and understanding the subject matter of the problem. Here, "hypothesis" means an idea, consistent with known facts, that serves as a starting point for further investigation to prove or disprove that idea. The meaning of the term hypothesis is applied in the most general sense and is sufficiently broad to apply to an industrial context as well.
In SR&ED, it is expected that a planned approach is formulated, that is:
This means that the objectives of the SR&ED work, as well as the indicators and measures to be used to determine if those objectives have been met, must be clearly stated at an early stage in the work’s evolution. In addition, the method of experimentation or analysis by which the scientific or technological uncertainties are to be addressed must be clearly set out. Finally, the results of the SR&ED efforts that follow have to be properly identified. Often, this is an iterative process as new uncertainties are recognized and new or modified hypotheses are developed and tested based on the results of the prior iteration. It is expected that the work will be performed or directed by qualified individuals who are knowledgeable in the field and have relevant experience in science, technology, or engineering. Note that qualification is not necessarily limited to formal training, but includes skills and knowledge gained through experience.
Scientific or technological advancement is the generation of information or the discovery of knowledge that advances the understanding of scientific relations or technology. One implication of advancement is that the new knowledge could be useful to other situations or circumstances beyond the current project in which the advance was made.
By showing why a possible solution will not succeed or will not meet the desired objectives, advancement in science or technology is still possible. In some instances, the project's objectives might not have been achieved but, in the process, SR&ED was carried out to understand the reasons for the failure. Hence, scientific or technological advancement can be achieved even if the project’s objectives are not met.
The rejection of a hypothesis is advancement because it eliminates a possible solution.
A record of the hypotheses, tests and results should be kept as the work progresses.
It is expected that the work be recorded, clearly showing why each major element is required and how each fits into the project as a whole. It is also expected that the indicators or measures that will be used to determine if the goals of the work are met will be identified and recorded at an early stage of the work.
As part of the systematic investigation or search, the progression of work is built on analyzing results from step to step. To build on the results of testing in a systematic way requires the organized recording of the work undertaken during experimentation or analysis. This is a basis for being able to capture, communicate, and, if necessary, repeat the work leading to the advancement of scientific knowledge or the technological advancement.
Overhead — traditional or proxy method
This case considered whether a taxpayer was entitled to claim scientific research and experimental development (SR&ED) investment tax credits under the Income Tax Act (the Act) in relation to a computer software development project.
Globalization of the pharmaceutical industry and increased outsourcing have drastically changed the R&D landscape. Our report explores the impact on R&D tax incentives.
Our latest guide offers a description of available benefits, the incentive application process, eligibility and IP jurisdictional requirements.
The Canadian Scientific Research and Experimental Development (SR&ED) program is a tax incentive aimed at encouraging investment, economic development and job creation in Canada.
SR&ED is different than what you may typically think of as R&D. The federal SR&ED program provides tax credits on work done, including prototyping, testing, and developing technologically advanced products or processes.? EY has multiple approaches and strategies to identify potential SR&ED.
Failed projects also qualify for SR&ED, a SR&ED project could be either a success or a failure. Further, it’s possible that the business project failed due to non-technical constraints (such as time, cost), but the technology project actually succeeded. EY will help you identify the correct scope for the SR&ED project.
SR&ED claims are filed on a per fiscal year basis. If the SR&ED project is incomplete at the end of a fiscal year, we can still claim many of the costs associated with your work on the SR&ED project in that year. Don't wait until the project is over to claim the tax credits.
That’s OK. Your company is still eligible. Even if you are in a loss position, Canadian Controlled Private Corporations (CCPC) are eligible to receive a refund on their SR&ED expenses. EY will help you to identify the best strategy to maximize the benefits from SR&ED, whether you pay taxes or not.
There are specific rules and guidelines regarding this aspect of the SR&ED work. EY will need to investigate on a case by case basis.
That's okay! You are still able to make a SR&ED claim! We are able to claim for the excess amount of costs, above and beyond what you receive. For example, if you spend $100 on SR&ED and you receive $15 from another program, we would be able to claim for the remaining $85 of costs.
You can still claim SR&ED if the work/knowledge that your competitors have is not publically accessible to you in the same timeframe you undertook the SR&ED project.
Formal records are not required. Any informal records such as emails, meeting minutes, notes, are all admissible as SR&ED documentation. EY will help you to identify these records to substantiate the claim, and we will also help you improve your documentation without disrupting your current business processes.
EY has many fee options, including but not limited to hourly, flat, contingency, etc. We are flexible to structure the fee to best fit your business needs.
Under the contingency fee plan, EY charges a percentage of the final refund you receive from Canada Revenue Agency (CRA). The reason for this is twofold. Firstly, our clients do not (necessarily) have the funds to pay us upfront for a new and uncertain service and prefer to pay us out of the refund cheques they receive from CRA. We monitor your claim throughout the CRA process until you receive your refund. We are with you every step of the way!
SR&ED claims are due to the CRA 18 months after your fiscal year end. For example, if you have a December 2015 year end, your claim will be due in June 2017. This is a firm deadline and all claims must contain the specified CRA documents to be considered complete. If you fail to submit the proper documentation by the deadline, your claim will be disallowed and no refund will be given.
EY tries to minimize the amount of time required by your staff to prepare a SR&ED claim. The actual time commitment will depend on the type and scope of the services you are looking for. For example, our full service will be handling all the claim preparations such as project description preparation (1-2 hours of interview time per project), cost schedule creation and tax forms paperwork. The amount of time required of your staff typically will not disrupt their day-to-day activities. Our philosophy is to take the SR&ED preparation off your plate, so you can continue to perform revenue generating activities to grow your business.
SR&ED claim is normally administered separately from the CRA's corporate audit function. The CRA has separate teams and guidelines for SR&ED audits and corporate tax audits.
After filing a SR&ED claim, CRA has a service standard up to 120 days (4 months) to assess refundable claims filed with the tax return or up to 240 days (8 months) to assess other claims. There are cases where a SR&ED claim gets assessed within weeks. EY has a dedicated team to conduct monthly follow ups directly with the CRA to get status updates on the claim. Therefore, you will always be informed and kept up-to-date on your claim status. If the SR&ED claim is selected for audit, then CRA has no clear standard. But with EY’s help, the process can be significantly expedited so that you can receive the SR&ED benefits as soon as possible.
EY will tailor our services to best fit your business needs. Overall, EY has a rigorous process to guide you through the complicated audit process. For example, before the audit we will carry out re-education sessions, paperwork preparation, mock audit sessions, etc. During the audit, we will provide active guidance to best meet the auditor’s expectations. After the audit, we will continue to prepare all the necessary paperwork requested by the auditor, and follow up with the auditor closely in order to obtain the optimal outcome.
Awareness and understanding of the SR&ED Program rules before or while the work is being conducted will make the preparation, filing and defending of your SR&ED claim much easier. Therefore, contact us immediately to learn more about how SR&ED and other business tax incentives can help a start-up company grow.
EY has extensive experience and a proven track record of success in providing clients with value-driven incentives services. Our team of scientists, engineers, IT professionals and tax specialists have diverse backgrounds to help you create a sustainable incentives strategy specific to your business.
Our approach to identifying the most beneficial incentives for your company and preparing the necessary applications is aimed at minimizing disruption to your business allowing you to focus on your ongoing work. You can count on us to adhere to project timelines while remaining flexible enough to work around the busy and changing schedules of your team.
Our well-honed and proven project management methodology enables us to execute the engagement efficiently and, with a high success rate with government authorities. This means more working capital for your business.
Optimizing the classification of capital assets for income tax purposes can have a significant impact on your corporate taxes payable and the resulting cash flow. At EY, our Capital Asset Review (CAR) group provides detailed reviews of your capitalization and tax classification policies. Whether the review is comprehensive or focused on a specific project, our professionals can use their in-depth understanding of your capital projects and the Income Tax Act to help your company reduce taxable income and increase cash flow.
Experience: EY is the only firm in Canada with a dedicated Capital Asset Review team, which is aligned with our similar practice in the US. Over the last ten years, we have performed over 250 capital asset reviews for large public and private companies with operations across Canada. These reviews covered over $12 billion in capital expenditures and resulted in tax savings in excess of $310 million.
Specialized skills: Our team includes dedicated tax accountants, scientists and engineers who understand your business and have significant experience conducting capital asset reviews for clients of all sizes.
Industry focus: We work with companies across a wide array of industries including: manufacturing; retail; real estate; pharmaceuticals; electrical utilities; financial services; forestry; telecom; oil and gas mining. Our broad industry experience allows us to bring you our knowledge of leading practices.
We wrote the book: Our tax professionals are editors of Ernst & Young’s Guide to Capital Cost Allowance
Tax savings: The typical savings from a capital asset review can represent 2% to 4% of your gross capital expenditures. These savings are generally recurring, since many of the classification policies recommended are also applicable to future capital acquisitions.
Proven low risk: EY has achieved a 99% acceptance rate for completed CARs.
Minimal time commitment: We provide the necessary resources to conduct a review with minimal time required from your team.
Learn from us: Our team will share our knowledge of capital asset classification practices and incentives with your personnel.
There may be a substantial opportunity for savings if your company is taxable and is planning to/or has recently completed a new construction or renovation project in any of the following areas (this list provides some examples and is by no means exhaustive of projects where CAR can be performed):
Please contact one of our professionals across Canada to learn more about Capital Asset Review and its application to your company.