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Updates on the SR&ED Tax Credit, IRAP and Government Programs in light of COVID-19

 

COVID-19 has created a lot of uncertainty for businesses of all sizes. This has required government intervention to assist them and the economy as a whole. How has COVID-19 affected research and innovation Government Funding Programs?

The Scientific Research and Experimental Development Tax Incentive Program (SR&ED) is a tax incentive program that encourages Canadian businesses to conduct research and development in Canada. Any expenses incurred by a company during their research and development (wages and other spending) will have a percentage returned back to them. The federal government has made some changes to the program’s process during these unprecedented times.

The general changes to the approval process for SR&ED credits has been to increase the speed in which the applications are completed. 

Assessments have improved from 120 days to as fast as 21 days. 

New audits on applications are not being called at this time, though faster claim processing can still lead to audits and reviews at a later date. Applications that were being reviewed prior to COVID-19 are still under review but the goal now is to accelerate these review times. To help keep physical distancing practices in place, first time SR&ED applicants are no longer required to have mandatory visits from CRA employees. In light of these changes, SR&ED claims are also being impacted by some of the relief programs the Canadian government has recently implemented.

The Canada Emergency Wage Subsidy (CEWS) is being offered to companies to prevent job loss and encourage the rehiring of laid off employees. 

 

This program will help eligible companies subsidize 75% of their employee wages for up to 12 weeks. 

This subsidy will decrease the amount a company spends on wages related to their SR&ED projects and therefore decreases their return. The impact on SR&ED return varies based on the number of contractors or full-time employees the project has, as well as the size of the overall company. Even with a decrease in SR&ED receivable, companies should have an overall net gain while receiving CEWS payments. For those that are ineligible for the CEWS, there is another government program that may assist them.

The Innovative Assistance Program (IAP) was announced on April 17th, 2020 and is set to have a funding amount of $250 million to assist small and medium-sized Canadian entities.  IAP provides a wage subsidy of up to 12 weeks to employers. The program will provide $847 per week per employee for the total 12 weeks. The goal is to assist any companies that are not able to financially sustain their operations during the COVID-19 downturn. 

Applications are currently closed for the program, but application status notifications and funding were set to begin the week of May 11th, 2020.

 The IAP is a branch of the Industrial Research Assistance Program (IRAP) and companies can apply for both.

IRAP is one of the most popular government programs for businesses as it helps encourage Canadian companies to develop innovative ideas and technology. The program has begun accelerating funding during this pandemic to help stimulate the economy and prevent businesses from laying off their employees. 

Priority funding is being given to companies with COVID-19 related projects in the works.

 Advisory services for the program are still being offered but are now being done remotely and virtually. Even in these trying times, companies are recommended to reach out to an advisor for guidance.

It’s important, regardless of economic uncertainty to start building a dialogue with a National Research Council (NRC) advisor. An advisor can help keep you informed and provide you with extra information regarding assistance programs.

 Staying consistently connected with an advisor could help you find other suitable programs for your company. 

They are also there to help you properly prepare and time your IRAP application for better success and approval.