This week we are looking at our “Ask an Expert” Mail bag! We have been noticing questions like this one. So here is our response!
Gas prices are up and I can’t justify spending more money on developing a new product. Can I still take advantage of the SR&ED program?
You do not have to develop a new product to be eligible for the SRED program. In fact, the program requirements stipulate nothing about having to develop a new product. As per the Canadian Tax Act, work is eligible for SRED according to whether or not technical (scientific) criteria can be met:
- Technological uncertainty
- Technological advancement, and
- Technological experimentation
Often, if you develop a new product, the aforementioned three criteria can be met. However, it is quite possible for the criteria to be met if an existing product or process is IMPROVED.
For example, let’s assume that you have successfully filed for SRED for the development of a new automotive headlight. If you could improve upon this headlight in some manner, then it may be possible for you to claim SRED. There are two ways you can do so.
1. SRED eligible product improvement
What if you were to improve the product by manufacturing it out of a different material? If scientific uncertainty exists on how to incorporate this material into the headlight, and you significantly advance a field of science, then your project may be SRED eligible.
2. SRED process improvement
Process engineering is considered a science, and thus, an advancement in the field of process engineering could be considered a SRED-eligible project. Forays into the automation of manufacturing processes, and in experimental lean manufacturing methods could potentially qualify, if technological uncertainty can be proven to exist.
Even if you have not developed any new products, it is quite possible that you have SRED-eligible activity. Therefore, when in doubt, it’s best to contact a SRED consultant. A qualified engineer will be able to look at your previous expenditures and determine what can be filed under the SRED program.
