Corporate Tax Management Inc.
Specializing in "Scientific Research and Experimental Development"
SR&ED as a term is defined in the Income Tax Act. The term is defined to mean a systematic investigation or search carried out in a field of science or technology by means of experiment or analysis. A systematic search would normally encompass a process by which a hypothesis is formulated or a technological objective is set a methodology is devised for testing whether the technological objective is met, the tests are performed, the results are observed, and conclusions are drawn. Systematic searches are often performed by skilled individuals who wear the white coats, but also can be performed by individuals in overalls on a shop floor. The qualification of the individuals to do the work, and the systematic search itself is often referred to as the technological content of a project.
SR&ED is defined to include basic research, applied research and experimental development. Experimental development is defined to be work undertaken for the purpose of achieving technological advancement for the purpose of creating new, or improving existing, materials, devices, products or processes. Work need not be revolutionary.
What Are Eligible Activities?
Eligible work includes incremental improvements to existing technology. A key part of assessing whether a project is an SR&ED project is whether it was undertaken for the purpose of achieving technological advance. A technological advance is generally understood to be the discovery by the taxpayer of technical knowledge that advances their understanding of scientific relations or technologies. The requirement for a discovery implies that there is an unknown or uncertainty of a technological nature at the beginning of a project which will be resolved through the systematic investigation process.
SR&ED activities are also defined to include support work or linked activities undertaken by or on behalf of a taxpayer with respect to engineering, design, operations research, mathematical analysis, computer programming, data collection, testing or psychological research, where the work is commensurate with the needs and directly in support of core scientific research and experimental development activities.
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