Most companies have heard of the federal government’s Scientific Research and Experimental Development (SR&ED) tax credit program for organizations spending money on R&D. If you haven’t, please check out our in-depth review of the SRED program’s history. However, many don’t know that each province also has a matching program that also gives tax credits in that province.
Each province varies greatly as to how much tax credits are given, if they are refundable or non-refundable, and how long they can be claimed. The good news is, they are all (generally) administered by the CRA, meaning the rules for claiming and what is eligible are the same as the federal program. You don’t have to make two claims to take advantage of both government incentives, and you won’t have to defend them twice to government reviewers.
How much can I get back for my R&D?
In British Columbia, approximately 30,000 business make an SRED claim each year. The majority of these are Canadian Controlled Private Corporations (CCPCs). If you are a CCPC, you can take advantage of both government programs. If you are also a small or medium sized enterprise, you will be eligible for the 35% refundable tax credit from the federal government. If the work is carried out in BC, you will also receive another 10% in BC refundable tax credits. Note that the provincial credits reduce the amount of expenditures for the federal government calculation, so its not quite 45% total, but they do add on top of each other. (It’s worthwhile to mention here that if the work is actually done in another province, you will need to make a claim in that province to get the provincial credits).
Note the term “refundable” used above. This mean you will receive a cheque from the government regardless if your company is in a taxable position or not.
What if I’m not a CCPC or and SME?
If you are not incorporated (a family farm for example), or if you are a foreign controlled company, or if you are above the official SME limit, then you are still likely eligible for both provincial and federal programs, however the amount of credits changes. Federally, the credit changes to 15%. The provincial amount remains at 10%. Unfortunately, both of these credits become non-refundable, meaning they have to be applied against taxes owing. You don’t just get a cheque. This means that if you are not in a taxable position, then the credits may not be as useful to you. The good news is that the federal credits can be carried forward for up to 20 years. The BC government also allows you to carry forward the provincial credits for up to 10 years. So if you are planning on being in a profitable position with 10-20 years, it is still worthwhile to make a claim and accumulate the credits.
How do I make a claim with the BC program?
More good news here. Since the BC program is also administered and reviewed by the CRA, there is very little extra you need to do. After preparing the standard federal SRED claim forms, you simply need to fill out one more form for the BC provincial government called a T666 British Columbia (BC) Scientific Research and Experimental Development Tax Credit. All other administration is then handled through CRA, including any questions or reviews that may come up in the course of the claim.
For more information on claiming SRED in British Columbia or any of the other provinces, please contact: Progression Capital
Written By: Phil Winter (P.Eng., M.Sc.)
