While your product and R&D teams are always striving to do their best work, activities that add value to your business aren’t by default eligible for Scientific Research & Experimental Development (SR&ED) tax credits.
In fact, separating and categorizing all the work that your R&D teams have executed into project “buckets” is one of the key facets of compiling an accurate, defensible and maximized SR&ED claim.
It’s also an activity that the Boast team loves to geek out over for our clients!
This all starts with first understanding the definition of a SR&ED Project versus what we’ll call in this blog a Company Project.
SR&ED projects involve a group of activities that aim to tackle “scientific or technical advancement” where all the work is in support of the same scientific mission.
A Company Project, on the other hand, are workflows that, in concert, only drive commercial advancement: While these activities may be rooted in R&D, they aren’t driving a unique innovation or broadening understanding of technical themes. Instead, the goal of this work is to increase market value or commercial outcomes, first and foremost.
To put a finer point on it, the Canadian Revenue Agency (CRA) has a handy 5-part questionnaire that every CCPC should vet their R&D projects through:
The Canadian Revenue Agency
- Was there a scientific or a technological uncertainty?
- Did the effort involve formulating hypotheses specifically aimed at reducing or eliminating that uncertainty?
- Was the overall approach adopted consistent with a systematic investigation or search, including formulating and testing the hypotheses by means of experiment or analysis?
- Was the overall approach undertaken for the purpose of achieving a scientific or a technological advancement?
- Was a record of the hypotheses tested and the results kept as the work progressed?
Of course, it must be said that SR&ED Projects and Company Projects are NOT mutually exclusive. More often than not, in fact, SR&ED Projects are born out of “hitting a wall” with known tactics or technologies that aren’t accomplishing the end goal of a specific Company Project, such as product development.
It’s defining the project GOALS and aligning the activities—from start to finish—within the scope of a SR&ED Project mission that becomes key to delineating activities that may warrant tax credits, from those that are just supporting commercial goals.
This is at the heart of the first question around Technological Uncertainty: For any activities to qualify, the goal of those efforts must be defined from the start.
A Business Problem is not necessarily Technological Uncertainty
This now poses the question of what exactly is Technological Uncertainty opposed to what’s just a general Business Problem.
While your team may be trying out certain methods for the first time, for example, if these techniques aren’t contributing to the overall knowledge base—that is, uncovering something totally new and not yet understood—they may be adding business value, but they won’t necessarily qualify for SR&ED.
Trial-and-error, for instance, to understand a product defect is simply Business Problem solving; the components are already built, and you may not understand how things went wrong, but you’re likely just working to identify an error in a known process—not untangling Technological Uncertainty.
Where these worlds overlap is when companies are looking for new ways to accomplish business tasks that call for innovation. Developing a totally new process to more cost-effectively execute R&D, for instance, may be rooted in commercial gains (cutting costs), but the ultimate goal is around net-new innovation to change how your team executes a scientific process.
It all really boils down to communicating the approach—and digging into the Technical Content prerequisite that demonstrates your goals from the start, and your “systematic process for testing hypotheses” that becomes critical.
Communication your Technological Advancement through Technical Content
It’s absolutely pivotal that your activities are not just recorded but contextualized for your claim to pass the CRA’s threshold for SR&ED funding.
This means identifying in depth the individuals who contributed to the process, the relevant investments—both from a payroll and materials perspective— and, finally, evidence that hypotheses were tested and results were analyzed at each step of the SR&ED project for it to potentially qualify.
This may sound like a tall order, calling on stakeholders across multiple departments—from finance to product to HR—to paint the full picture of your innovation and maximize your SR&ED claim.
But accessing the R&D tax credits you deserve doesn’t need to be a time and resource drain on the teams that should be focused on driving innovation.
Let Boast figure it out
With Boast, more than 1,500 companies across North America have worked with us to turn what could be a 60 hour process into just a 5 hour time commitment from your team. From there, not only do we strive to maximize your claim, but we leverage AI to seamlessly integrate your key workflow, payroll and financial data into a single platform of R&D intelligence.
This gives our skilled technical and tax experts a one-stop-shop to visualize your innovation, identify every possible SR&ED claim opportunity, and make the filing process simple and seamless.
From there, our team will already have access to the information they need to work on next year’s claim with even less lead time. And should your claim be audited, we have a single source of truth to defend your claim and ensure you get the money back your deserve, with more than double the industry average for successful SR&ED claim defense.
Interested in learning more? Talk to one of our SR&ED experts today.
SR&ED Projects vs. Company Projects FAQ
- What is the difference between an SR&ED Project and a Company Project? An SR&ED Project involves activities aimed at achieving scientific or technological advancement, while a Company Project focuses on commercial advancement and increasing market value.
- What are the key criteria for an activity to qualify as an SR&ED Project? The CRA uses a 5-part questionnaire to determine eligibility, including identifying a scientific or technological uncertainty, formulating and testing hypotheses systematically, and maintaining records of the experimentation process.
- Can a business problem be considered technological uncertainty? No, a general business problem or trial-and-error troubleshooting of known processes does not necessarily qualify as technological uncertainty. The goal must be to uncover something totally new and expand scientific or technological knowledge.
- What is the importance of technical content in an SR&ED claim? Detailed documentation of the individuals involved, investments made, hypotheses tested, and results analyzed is crucial for demonstrating a systematic approach to technological advancement and meeting the CRA’s eligibility criteria.
- How can Boast help with the SR&ED claim process? Boast’s AI-powered platform integrates your R&D data, identifies claim opportunities, and streamlines the filing process, reducing the time commitment from 60 hours to just 5 hours while maximizing your claim and defending it against audits.
