Transcript Document

Welcome to an
Update on SR&ED and Other
Innovation Funding
Todays’ event will
begin at 10AM
Webinar attendance tip: turn off powersaver and screensaver options on your computer
and ensure your zoom settings allow you to see the entire slide
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This presentation is not sufficient for unassisted tax planning
© TSGI-Chartered Accountants 2013
Update on SR&ED and Other
Innovation Funding
An ICAA Webinar prepared by
TSGI-Chartered Accountants
May 8, 2013
Webinar attendance tip: turn off powersaver and screensaver options on your computer
and ensure your zoom settings allow you to see the entire slide
2
This presentation is not sufficient for unassisted tax planning
© TSGI-Chartered Accountants 2013
Presentation Scope and Format
This 1 hour presentation will discuss the impact of recent and proposed changes to the SR&ED
program and other innovation funding. A slide show and audio stream are both part of this
presentation. Familiarity with the SR&ED fundamentals is assumed. For an introduction to SR&ED see
tsgi.ca/resources/frequently-asked-questions.
Solving Sound Problems and Technical Support
If you are having trouble hearing the sound stream please try the following:
• Ensure your computer sound system is enabled and is not muted.
• Ensure you have joined the conference audio stream by choosing the following menu item:
“Communicate ->Integrated Voice Conference->Join Conference”
• Further technical support is available by visiting Cisco WebEx support at the following address and
typing your question into the search query box:
https://support.webex.com/MyAccountWeb/knowledgeBase.do?root=Tools&parent=Knowledge
How To Ask Questions
Questions from the listening audience are encouraged during the presentation via the built-in Q&A
tool. To submit a question, choose your intended recipient and type your question in the window.
Additionally, you can use the “Feedback” button to tell us if we are going too fast, too slow or even to
indicate laughter or applause.
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About the Presenters
TSGI – Chartered Accountants
TSGI is a chartered accountancy that works exclusively in the field of R&D funding for companies
headquartered or operating in western Canada. The firm has over 20 years of experience in SR&ED
and are former instructors for the ICAA course on this topic. A significant portion of TSGI’s clients
are referred by independent and mid-sized CA firms that lack access to internal SR&ED specialists.
TSGI does not undertake general accounting or non-SR&ED taxation engagements.
KEN CUDMORE
President
GRAHAM SMITH
VP of Bus. Development
Ken is a veteran CA with more than 30 years
experience in public practice and SR&ED
services. He spent three years as a fulltime
faculty member at the University of Calgary
and is a past instructor of the ICAA SR&ED
course. Ken holds a B.Sc. in computer science
and a M.B.A. from Dalhousie University
Graham has been active in the SR&ED industry
for more than 8 years as a claimant and tax
preparer. Prior to joining TSGI, Graham spent
11 years in the manufacturing industry as a
researcher, manager, and VP at a Calgary-based
engineering firm. Graham holds a B.Sc. in
physics from the University of Calgary.
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Recap of the 2012 Budget and Implementation
Changes proposed were (implementation dates in brackets)
• Reduction of SR&ED contract payments from 100% to 80% (Jan. 1, 2013)
• Overhead proxy allowance reduced from 65% to 60% (Jan. 1, 2013) and then
to 55% (Jan 1, 2014)
• General ITC rate reduced to 15% from 20% (Jan 1, 2014)
• Capital expenditure eligibility eliminated (Jan 1, 2014)
• $6 million to the CRA to improve program predictability
Royal assent received and Budget 2012 effective Dec. 14, 2012
• Enacted generally as proposed
• Small surprise: 80% eligibility cap applied to SR&ED contracts and 3rd Party
payments
• Some flexibility on capital items, for example, soft costs like wages for selfconstructed assets will be allowed.
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Net SR&ED Benefits In Alberta
For the purposes of this table, the rates applicable for 2012 and earlier are shown
in grey, rates applicable for 2013 in burgundy, and those for 2014 and later
in blue.
Table reflects current Alberta legislation maintaining proxy at 65%.
Footnotes available at tsgi.ca/resources/frequently-asked-questions
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Impact of the 2012 Budget
Economic Assessment
• Service provider data indicates:
• CCPC’s: 5-10% reduction in ITCs
• Non-CCPC’s: 30-60% reduction in ITCs
• Impact on claimants will be highly variable depending on mix of corporate
expenditures
• Macro impact of 2012 Budget is proving hard to predict for non-insiders.
• Estimates of reductions in SR&ED spending range from $500M-$1.3B
SR&ED Simplification Efforts
• Mixed feedback on efforts to simplify the program
• New capital rules and reduction in proxy may increase complications
• Policy Review Project has finished: reduced relevant papers from 70+ to 24
• Commitment to study SR&ED consultancy fees.
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The Policy Review Project
Overview
• Purpose was to simplify, consolidate and harmonize the publications used to
administer the program
• Intention was not to write new policy
• Completed with final policy papers released on Dec 19, 2012
• Admirable simplification of the program
• Overall project has been professionally and well executed
David Brin
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The Policy Review Project – Technical Impact
The Eligibility of Work for SR&ED Investment Tax Credits Policy
1.
Was there a scientific or a technological uncertainty—an uncertainty that
could not be removed by standard practice? (Tech Uncertainty)
2.
Did the effort involve formulating hypotheses specifically aimed at reducing
or eliminating that uncertainty? (Tech Content)
3.
Was the adopted procedure consistent with the total discipline of
the scientific method, including formulating, testing, and modifying the
hypotheses? (Tech Content)
4.
Did the process result in a scientific or a technological advancement?
(Tech Advancement)
5.
Was a record of the hypotheses tested and the results kept as the work
progressed? (Tech Content)
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Comments on the New Policy Papers
Concerns About Rising Eligibility Standards
• Concern within the SR&ED community about raising the scientific standards
for technical eligibility.
• Concerns that the requirements for formal documentation are being
increased;
• Several of the new papers strongly emphasize documentation
(both scientific and financial).
Legal Status
• The papers came into effect immediately because they are supposedly not
new policy
• The 5 Questions eligibility test is derived from the Northwest Hydraulics
Consultants case (Bowman, May 1, 1998)
• Policy papers do not carry the force of law although they are very significant.
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Federal Budget 2013
More Resources for the CRA
• $5 million over two years in additional funding to the
CRA to improve outreach, especially to first time claimants
• $15 million over two years to provide additional CRA audit resources where
the risk of non-compliance and ineligibility is perceived to be high
Mandatory Disclosure of SR&ED Preparers and Fees
• Requirement for complete and accurate disclosure of who participated in the
SR&ED preparations and their fees.
• Introduction of a $1,000 per claim penalty for failure to meet the disclosure
requirements
• Effective the later of date of date of Royal Assent or Jan 1, 2014
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Other Federal Direct Innovation Funding
2012 (highlights):
• Increases in direct funding (eg +$110 million/year to IRAP)
• Federal procurement programs used as incentive tools
• Re-alignment of Federally supported institutions
towards industry-relevant research
2013
• $37 million per year in additional funding to support Industry/Post-Secondary
research NSERC, CIHR, SSHRC etc.
• $20 million over three years to help SMEs access R&D and business
development services at universities, colleges and non-profits.
• $325 million over eight years to Sustainable Development Technology Canada
(SDTC) to support new clean technology development.
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Details on Venture Capital Access Programs
Details released on the $500 million in VC funding promised in 2012
• The $100 million in BDC funding to be awarded to business accelerator
programs and co-investments into companies graduating from accelerators.
• The $400 million in general VC funding to be disbursed through the Venture
Capital Action Plan announced in January 2013.
New VC Funding in Budget 2013
• $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
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Update on Provincial SR&ED Programs
Alberta
• 2012: Budget passed and undid the double-grind
• 2013: Budget no changes
• Current legislation maintains the proxy allowance at 65%; this is under review.
British Columbia
• 2012 & 2013: no changes
• Current program scheduled to expire August 31, 2014
but is anticipated to be renewed.
Saskatchewan
2012:
• Excluded non-CCPCs from refundability
• Cap CCPC refundability to an annual max of $450k benefit
(after that ITCs become non-refundable)
2013: no change
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SR&ED Overview and Weather Report
Summary of Changes – Consistent Themes
• Legislative reductions in SR&ED expenditures
• Policy Review with potential for increased eligibility requirements
• Increasing CRA resources for audit
Forecast for the Future 2013
• 2012 and 2013 are consistent with the themes of reducing SR&ED
expenditures and increasing compliance
• SR&ED claimants will see CRA more often and with an enthusiasm for
compliance
• Speculation: there will not be major modifications until the
current changes have run their course
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Questions
To ask a question please:
• Go to the Q&A pane, choose who you want to ask, and then type your
question in the window.
• Presenters will endeavour to address questions with the widest appeal to the
general audience on a priority basis.
A copy of this presentation will be available after this event at
http://tsgi.ca/resources/sred-presentations
Disclaimer
This presentation has been prepared for the Institute of Chartered Accountants of Alberta (ICAA) for the benefit of its
members by TSGI-Chartered Accountants (operating through TSGI Professional Corporation). Reasonable efforts have
been made to ensure the accuracy of the information presented here but attendees are cautioned to exercise due
diligence before proceeding with tax decisions. Statements of opinion made during this presentation are those of the
presenters and do not represent the position of the ICAA.
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