Yearly Archives

2013

TSGI Presenting to the Canadian Association of Drilling Engineers November 20, 2013 (Posted November 1, 2013)

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Graham Smith of TSGI-Chartered Accountants will present a talk entitled “Working Better, Faster: How to Use the SR&ED Program to Turbocharge Your R&D” to the November 20th, 2013 meeting of the Canadian Association of Drilling Engineers (CADE). The presentation will focus on how energy sector companies are using SR&ED to fund the development of technologies that give them a competitive edge. The recent changes to SR&ED will also be reviewed, along with a discussion of how companies are adapting to the new regime.

Further information and registration details are available through the CADE website at: www.cadecanada.com

 

Note: TSGI does not maintain this news article after its initial posting. Readers are further advised that the information presented here may not be sufficient for unassisted tax planning. Please contact a TSGI representative if you require clarification or other assistance regarding this topic.

TSGI Outclasses Competition in Side-by-Side Comparison (Posted October 28, 2013)

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A major oil and gas producer in Calgary recently provided comments on a side-by-side comparison they made of TSGI’s SR&ED services vs another major accounting firm. Here is what their General Manager of Taxation thinks:

I was very concerned about selecting the right SR&ED consultancy for our corporation. Our financial affairs were complicated and our technical groups were 100% engaged in our R&D projects. To ensure we made the best decision we ran a side-by-side comparison between TSGI and a Big-4 accounting firm. Both firms were given an equivalent amount of work and the same operational parameters. By the end of the test it was clear that TSGI had outperformed in every category. Their project management, stakeholder communication, SR&ED expertise, and understanding of how SR&ED impacted our other tax considerations were all clearly superior. We have now worked with TSGI on more than four tax years and are fully satisfied that we made the right decision.

For more feedback on our services see http://tsgi.ca/about/testimonials/

CRA Updates SR&ED Filing Requirements for Partnerships with Corporations as Members (Posted September 5, 2013)

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On August 14, 2013, the CRA released an administrative update revising the SR&ED filing requirements for partnerships with corporations as members. The text below addresses only this scenario.

Under policies effective as of January 1, 2011, the Form T661 Scientific Research and Experimental Development Expenditures Claim should be filed at the partnership level along with the Partnership Information Return. The T661 should now be filed no later than 12 months after the earliest tax filing due date out of all the members of the partnership (for the tax period in which the partnership’s fiscal period falls). The T661 and Partnership Information Return must be in agreement and must both be received before the deadline for a claim to be considered to be filed on time.

Corporations that are members of a partnership will no longer be required to file a T661 for the partnership’s activities with their Form T2 Corporate Income Tax Return. Instead, partners claiming ITCs will be expected to support these allocations by providing information slip T5013 Statement of Partnership Income. Note that any corporation engaged in SR&ED outside the partnership must still submit a T661 with their T2 to cover those activities.

 
Further Information:
Further information on this topic is available at: Revised SR&ED filing requirements for partnerships with corporations as members – Update. The CRA expects to update the two primary SR&ED policies related to this issue in the near future. These are the: SR&ED Filing Requirements Policy and SR&ED Claims for Partnerships Policy.

 
How TSGI-Chartered Accountants can assist you:
Readers are cautioned that requirements for claiming SR&ED for partnerships can vary depending on a number of factors not discussed here. Furthermore, as a result of the August 14, 2013 changes, it is possible that some members of partnerships may now be able to claim SR&ED benefits for which the previous filing deadline had passed. Conversely, some members of partnerships may have now lost the opportunity to claim certain SR&ED benefits. TSGI recommends that taxpayers participating in SR&ED partnerships seek professional advice to assess the impact of these revisions and explore possible remedial actions.
 
 
Note: TSGI does not maintain this news article after its initial posting. Readers are further advised that the information presented here may not be sufficient for unassisted tax planning. Please contact a TSGI representative if you require clarification or other assistance regarding this topic.

TSGI Presenting at the PTAC 2013 SME Showcase of Technologies, October 24, 2013 (Posted August 29, 2013)

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Graham Smith of TSGI Chartered Accountants will present a talk entitled “The Role and Importance of SR&ED in Funding Innovative Energy Technology” at the 2013 SME Showcase of Technologies hosted by the Petroleum Technology Alliance of Canada. This full-day event is one of the most valuable and targeted energy technology forums of the year and features speakers from a broad spectrum of stakeholder organizations. Agenda information, presentation abstracts, and registration details can be found at http://www.ptac.org/events/84.

 
 
Note: TSGI does not maintain this news article after its initial posting. Readers are further advised that the information presented here may not be sufficient for unassisted tax planning. Please contact a TSGI representative if you require clarification or other assistance regarding this topic.

TSGI Presenting to the Canadian Bar Association September 12, 2013 (Posted August 29, 2013)

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On September 12, 2013, Graham Smith of TSGI-Chartered Accountants, will be presenting to the Canadian Bar Association, South Section (Technology, IP Law & Tax Non-Specialists Joint Meeting). This presentation,  entitled  “An Update on the SR&ED Program and Other Innovation Funding In Alberta”, will focus the recent changes to technology funding and how these will impact clients of CBA members. Further information and registration details are available at http://www.cbapd.org/details_en.aspx?id=AB_STEC12913

 
 
Note: TSGI does not maintain this news article after its initial posting. Readers are further advised that the information presented here may not be sufficient for unassisted tax planning. Please contact a TSGI representative if you require clarification or other assistance regarding this topic.

Changes to Alberta’s SR&ED Prescribed Proxy Amounts (Posted May 30, 2013)

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As has been speculated over the past several months, the Alberta Tax and Revenue Association (TRA) has gone forward with an erosion of the provincial SR&ED proxy amounts, parallel to the Federal proxy reduction:

  • 65% on salaries associated with SR&ED work done prior to 2013;
  • 60% on salaries associated with SR&ED work done January 1, 2013 – December 31, 2013;
  • 55% on salaries associated with SR&ED work done after 2013

 

Bill 23 received Royal Assent May 27, 2013, but the changes to the proxy amounts (Section 26.6) are retroactive to January 1, 2013.

For further information, please contact TSGI-Chartered Accountants:
Graham Smith
403-451-3376
Graham.Smith@tsgi.ca
 
 
Note: TSGI does not maintain this news article after its initial posting. Readers are further advised that the information presented here may not be sufficient for unassisted tax planning. Please contact a TSGI representative if you require clarification or other assistance regarding this topic.

TSGI Teams Up with the ICAA to Present an Update on SR&ED and Other Innovation Funding (Posted May 2, 2013)

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TSGI-Chartered Accountants is proud to present an update on the SR&ED program and other innovation funding to the membership of the Institute of Chartered Accountants of Alberta (ICAA). This 75 minute web-based seminar will take place on May 8th, 2013 at 10AM MDT and is open to all ICAA members. There is no charge to attend.

Topics will include:

  • A review of the changes to SR&ED that occurred in 2012
  • A discussion of the 2013 Budget proposals regarding SR&ED
  • An overview of what else is going on in the innovation funding landscape in Canada and Alberta
  • A summary of how Alberta-based research companies are likely to be impacted by the recent changes

 

The session will feature a discussion by Ken Cudmore (CA) and Graham Smith (BSc) of TSGI-Chartered Accountants. Both Ken and Graham are former instructors of the ICAA course on SR&ED.

Registration for this event is at: tsgi.webex.com

 
 
Note: TSGI does not maintain this news article after its initial posting. Readers are further advised that the information presented here may not be sufficient for unassisted tax planning. Please contact a TSGI representative if you require clarification or other assistance regarding this topic.

Impact Assessment of the 2013 Federal Budget on SR&ED and Innovation Funding (posted March 31, 2013)

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SR&ED Changes Proposed in the 2013 Budget – A Focus on Compliance
Unlike in the 2012 Budget, the Federal Government has not attempted to implement sweeping changes in the SR&ED program in the latest budget. The changes that have been proposed are relatively modest and are almost exclusively focused on improving compliance with the program’s objectives. The primary proposals are:

  • $5 million over two years in additional funding to the CRA to develop educational materials and improve outreach to SR&ED claimants, particularly first-time claimants.
  • $15 million over two years to the CRA to facilitate additional reviews of SR&ED claims where the risk of non-compliance or ineligibility is perceived to be high.
  • Changes to SR&ED claim forms to require full and accurate disclosure of the participation of third-party tax preparers and their compensation arrangements.
  • The introduction of $1000 per claim penalties for instances of incomplete or inaccurate disclosure of SR&ED preparation arrangements and fees. The disclosure requirements come into effect the on the later of January 1, 2014 or the day of Royal Assent to the legislation.

The changes proposed in the 2013 Budget are consistent with the Government’s broad objectives of increasing SR&ED compliance and reducing annual outlays. Taken in conjunction with the new administrative policies that may provide the CRA with an expanded eligibility assessment toolkit (see Observations on the CRA SR&ED Policy Review Project Documents), taxpayers should expect to see more frequent and more vigorous SR&ED audit activity.

In addition to increasing strictness, the SR&ED program will become significantly less generous over the next two years as the changes enacted through the 2012 Budget take effect. Estimates of the expected reduction in funding range from $500 million to $1.3 billion per year. For comparison, the SR&ED program provided approximately $3.6 billion in tax assistance in 2012.

Further information is available at: Budget 2013 Chapters 3 and 4 and Budget 2013 Annex 2

 

Other Federal Innovation Funding Changes
In keeping with the recommendations of the 2011 Jenkins Report, the Government is redistributing some of the savings resulting from the changes to the SR&ED program into direct funding initiatives. The intent of these funds is to maximize the commercial relevance of all forms of government-funded research. Funding announced in the 2013 Budget includes:

  • $37 million per year in additional funding to support Industry/Post-Secondary research partnerships through the existing granting councils (NSERC, CIHR, SSHRC)
  • $121 million over two years to the National Research Council (NRC) to assist with re-focusing on growing innovative businesses.
  • $20 million over three years to help small and medium sized businesses access R&D and business development services at universities, colleges and non-profits. This funding is to be administered by NRC-IRAP.
  • $325 million over eight years to Sustainable Development Technology Canada (SDTC) to support new clean technology development.

Further information is available at: Budget 2012 – Comments on General Innovation Funding and Budget 2013 Chapters 3 and 4

 

New Venture Capital (VC) Funding and Status of Previous Initiatives
The 2013 Budget also announced the following new Federal funding for venture capital:

  • $60 million in new funding over five years to high-potential incubator and accelerator organizations to expand their services
  • $18 million in funding over two years to support youth entrepreneurship through the Canadian Youth Business Foundation

The above funding is in addition to the $500 million in venture capital financing that was pledged in the 2012 Budget. The 2013 Budget provided additional detail on the implementation of the 2012 venture capital funding:

  • The $100 million to be disbursed through the Business Development Bank of Canada is to be awarded to business accelerator programs and through co-investments in companies graduating from such programs.
  • The $400 million in general funding will be administered through the Venture Capital Action Plan announced in January 2013. Fund distribution will be: $250 million to establish two new private sector-led funds of funds, up to $100 million to recapitalize existing private sector-led funds of funds in partnership with interested provinces, and $50 million in direct investment into three to five existing Canadian venture capital funds.

Further information is available at: Venture Capital Action Plan and Budget 2013 Chapters 3 and 4

 

Overall Impact Assessment on Canadian Innovation Funding
The changes enacted/proposed in the 2012/2013 budgets dramatically alter the landscape for Federal funding available for private sector technology development and commercialization. Innovative companies will no longer be entitled to the previous level of funding through the SR&ED program and will have to compete for resources administered through granting organizations. This change may be somewhat mitigated by improved opportunities to work with post-secondary and non-profit organizations that are being increasingly directed to turn their research efforts towards industry-relevant problems.

It is not clear from the available data that the savings from the SR&ED program changes will be fully reinvested in innovation-oriented direct granting and venture capital funding.
 
 
Note: TSGI does not maintain this news article after its initial posting. Readers are further advised that the information presented here may not be sufficient for unassisted tax planning. Please contact a TSGI representative if you require clarification or other assistance regarding this topic.

Observations on the CRA SR&ED Policy Review Project Documents (posted March 27, 2013)

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In late 2012, the SR&ED Directorate of the CRA released the final versions of the policy documents resulting from the Consolidated Policy Review Project. The 24 documents released are intended to ameliorate the problems with the +70 pre-existing guidance papers – most notably disjointed presentation of information, redundancy, and non-harmonized use of terms. The new documents provide admirably succinct guidance on the history and future administration of the SR&ED program.

Perhaps the most interesting of the new publications is the Eligibility of Work for SR&ED Investment Tax Credits Policy, which introduces a Five Questions test for use in assessing the technical eligibility of SR&ED work. The Five Questions test is derived from a well-known legal case referred to as The Northwest Hydraulics Case, this is the first time the test has been proposed as a formal part of SR&ED eligibility policy. The Five Questions test is considered by CRA to be equivalent to the current Three Criteria method. The Five Questions are as follows (with their associated Three Criteria equivalent shown in brackets):

  1. Was there a scientific or a technological uncertainty—an uncertainty that could not be removed by standard practice? (Technological Uncertainty)
  2. Did the effort involve formulating hypotheses specifically aimed at reducing or eliminating that uncertainty? (Technological Content)
  3. Was the adopted procedure consistent with the total discipline of the scientific method, including formulating, testing, and modifying the hypotheses? (Technological Content)
  4. Did the process result in a scientific or a technological advancement? (Technological Advancement)
  5. Was a record of the hypotheses tested and the results kept as the work progressed? (Technological Content)

 

The CRA has stated that the purpose of the policy review project was not to create new policy, but to clarify and harmonize existing policy. For this reason the new policy papers became effective for administrative purposes immediately upon final publication on December 19, 2012.

Concern has been expressed within the SR&ED community as to whether the new policy papers represent a de facto elevation of the technical eligibility standard to which SR&ED claims will be held. For example, it has been observed that the legislation governing the SR&ED program does not require adherence to the “total discipline of the scientific method”: the Income Tax Act specifies that SR&ED be a “systematic investigation or search… in a field of science or technology by means of experiment or analysis…”. These two specifications are not equivalent. Whether the new papers result in effective changes to the eligibility standards for SR&ED will likely come down to how they are interpreted and applied by frontline CRA personnel and their managers.

It should be noted that CRA-generated policy papers, while important for the administration of the program do not carry the weight of law. This is particularly true of the new documents since they have not been tested in court in their current forms. SR&ED claimants should be cognizant, however, of the fact that the CRA will be using these papers authoritatively to administer the program on a go forward basis.

TSGI-Chartered Accountants is recommending that taxpayers review their SR&ED processes in light of the new guidance papers and make any necessary adjustments. Observance of the CRA’s interpretation of appropriate contemporaneous documentation is particularly advised if claimants desire to avoid conflict with the agency.

For further information, please contact TSGI-Chartered Accountants:
Graham Smith
403-451-3376
Graham.Smith@tsgi.ca

 
 
Note: TSGI does not maintain this news article after its initial posting. Readers are further advised that the information presented here may not be sufficient for unassisted tax planning. Please contact a TSGI representative if you require clarification or other assistance regarding this topic.

No SR&ED Changes in the 2013 Alberta Budget Proposal (posted March 18, 2013)

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The Government of Alberta announced its 2013 budget legislation on March 7, 2013. No changes were proposed to the province’s SR&ED program.

Keep up to date with other potential SR&ED changes by bookmarking our news page at: www.tsgi.ca/resources/news

 
 
Note: TSGI does not maintain this news article after its initial posting. Readers are further advised that the information presented here may not be sufficient for unassisted tax planning. Please contact a TSGI representative if you require clarification or other assistance regarding this topic.