SR&ED Helps to Drive Cleantech in Canada
Canada's SR&ED (Scientific Research and Experimental Development) Tax Incentive program is one of the most generous R&D tax incentives in the world, and crucial in propelling the cleantech sector. However, the complexities of documenting R&D expenses and project details for SR&ED present unique challenges.
Most companies that apply for a SR&ED tax credit don't have standardized processes, SR&ED production tools, organized data or a streamlined workflow. This leads to complex & expensive SR&ED claim preparation.
​
This underlines the importance of using specialized SR&ED management software. With integrated documentation processes your claim will be larger, your cost to manage it will be lower, and your data will be defensible in an audit.
​
Trackwork Simplifies SR&ED
Trackwork SR&ED software is specifically built for the complexities of submitting a SR&ED claim by improving efficiency and oversight, maximizing claim values, and reducing overhead.
Canada provides over $3.5 billion in tax incentives to over 20,000 R&D claimants annually. Your project is eligible for SR&ED tax incentives if it:
-
Addresses a technological or scientific uncertainty
-
Addresses a technological advancement
-
Uses a systematic investigation or search
Benefits you may be eligible for:
-
Receive up to 69% back on eligible salaries.
-
Claim back up to 36% of contractor costs.
-
Up to 45% of costs for materials consumed or transformed.
-
Provinces add between 3.5% to 30% on qualifying expenses.
-
Canadian-Controlled Private Corporations can earn a 35% refundable tax credit on up to $3 million in expenditures.
Cleantech Companies Face Unique Challenges in Documenting R&D for SR&ED
​
With rapid technological advancements, companies must remain agile in their R&D approaches, and this can lead to chaos when it comes to proper documentation and data management when it comes time to submit for SR&ED.
Without the proper tools in place almost all companies are leaving money on the table. Efficiently tracking projects, ensuring accurate researcher time allocation, and monitoring progress is the foundation of a successful claim. Inefficiencies can lead to lost opportunities with financial implications.
Funding for Early-Stage Development
Unlike some other industries, innovation in cleantech often requires significant early-stage investment due to the need for intensive R&D. Maximizing available tax benefits through proper systems that will grow with the company will pay off year over year.
Long ROI Period
The return on investment (ROI) for cleantech can be longer than in other sectors. This puts pressure on these companies to secure funding and make the most of incentives like SR&ED.
Regulatory Compliance
Regulatory standards in cleantech often require a higher level of detail in reporting and documentation. This can mean that the data needed for SR&ED claims may be more extensive and intricate than in less regulated industries. Some regulatory requirements can impose technical constraints on R&D projects. Documenting these constraints in a way that is favorable for SR&ED claims, while also ensuring regulatory compliance, can be challenging. Tangible goals and clear processes for documentation is key supporting a SR&ED argument.
Documentation
Cleantech projects often involve numerous iterations and experiments. Maintaining a clear, consistent, and comprehensive documentation trail for SR&ED in this agile environment is unlikely without the proper system in place. Integration into the company’s systems and workflow will ensure participation from employees.
Eligibility Concerns
Distinguishing between "technological advancement" and "routine development" can be complex in the cleantech sector, especially when many activities may appear as incremental improvements but have a significant environmental impact. Using SR&ED software designed to be flexible and adaptable as R&D projects evolve allows the consultant or SR&ED manager to tell a more accurate story.
Increased Scrutiny
Given the environmental and safety implications associated with many cleantech innovations, these companies may face heightened scrutiny from both regulatory bodies and the SR&ED program, demanding impeccable record-keeping.
Quantifying Results
In the cleantech space, the success of an R&D project isn't always a straightforward technological advancement. It might be a reduction in emissions or increased energy efficiency, which can be harder to quantify in traditional SR&ED terms. Being able to see the big picture when crafting a SR&ED narrative is key.
Canada Accelerates Cleantech Innovations
​
Canada is globally recognized for its commitment to clean technology and climate solutions. Approximately 3% of the country’s GDP is supported by cleantech, generating 341K jobs, in over 11,000 companies.
Improving the rate of energy technology innovation is critical to enable decarbonization goals across all sectors required to achieve net zero emissions by 2050. Both innovative startups and large businesses are the engines driving Canada's cleantech growth on the global market. Canada announced its intention to scale up green energy and cleantech manufacturing capacity, with proposals for over $60 billion in tax credits and an additional $20 billion in sustainable infrastructure investments in its 2023 budget.