Frequently Asked Questions

The Scientific Research and Experimental Development (SR&ED) program was established by the Government of Canada to encourage Canadian businesses to conduct research and development activities. The Canada Revenue Agency is responsible for the administration of the SR&ED program. The SR&ED program is the largest source of federal government assistance for research and development.

In order for a project to qualify under the SR&ED program it must meet the following three criteria:

1. Scientific or technological advancement – The work must generate information that advances the understanding of scientific relations or technologies.

2. Scientific or technological uncertainty – Whether a given result or objective can be achieved, or how to achieve it, is unknown or cannot be determined based on generally available scientific or technological knowledge or experience.

3. Scientific and technical content – There must be evidence that qualified personnel with relevant experience in science, technology, or engineering have conducted a systematic investigation through experiment or analysis.

In order for an activity to be eligible under the SR&ED program, the work must meet the legislated requirements. In particular, the work must fall into one of the following categories:

Experimental Development – Activities performed to achieve one or more technological advancements. The advancement can take the form of the creation of new technologies, incremental improvements, new materials or devices, products or processes.

Applied Research – Work done to advance scientific knowledge with a specific practical application in view. Basic Research – Work done to advance scientific knowledge without a specific practical application in view.

Support Work – Activities that directly support the needs of experimental development, applied research, and basic research. Only the specific tasks outlined below may fall under this category:

• engineering;
• design;
• operations research;
• mathematical analysis;
• computer programming;
• data collection;
• testing; and
• psychological research.

The following categories of work are not eligible for submission under the SR&ED program:

- research in the social sciences or the humanities;
- commercial production of a new or improved material, device, or product, or the commercial use of a new or improved process;
- style changes;
- market research or sales promotion;
- quality control or routine testing of materials, devices, products, or processes;
- routine data collection; and
- prospecting, exploring, or drilling for or producing minerals, petroleum, or natural gas.

While first time claimants are allowed to use reasonable estimates for their SR&ED claims, the Canada Revenue Agency does require that organizations filing SR&ED claims differentiate between routine development activities and SR&ED eligible activities. Mobile Capital can help your organization implement non-intrusive time tracking processes that can simultaneously maximize your SR&ED claim, and provide the necessary supporting documentation for the CRA.

From time to time, the CRA will pick an organization for either a financial, technical, or combined (i.e. financial and technical) review. The purpose of these reviews is to substantiate the SR&ED claim, to ensure that the organization understands how to differentiate SR&ED eligible activities from routine work, and ensure the appropriate costs are being captured. SR&ED reviews are limited to a review of the SR&ED claim being processed and do not trigger full financial audits of the claimant.

A SR&ED claim must be filed within 18 months of the end of your organization's fiscal year. For example, if your organization's fiscal year end is December 31, 2009, a claim for the fiscal year must be filed by June 30, 2010. Typically, claims are filed along with your organization's corporate taxes.

A joint filing is when your organization submits its corporate taxes along with all of the necessary documentation for its SR&ED claim. For refundable claims filed jointly, the CRA will typically process your claim within 120 days. Non-refundable claims may take up to 365 days to process.

An amended filing occurs when a SR&ED filing is submitted after the corporate tax filing for the same fiscal year has been submitted to the CRA. For refundable claims filed as an amendment, the CRA may take up to 240 days to process your claim. Non-refundable claims may take up to 365 days to process.

A SR&ED claim can be filed by virtually any entity conducting eligible work within Canada. Canadian controlled private or public corporations, foreign corporations, sole proprietorships, partnerships and other entities who are required to complete a T1 or T2 tax filing are eligible to claim SR&ED. Your organization's corporate and ownership structure may however affect the percentage of your return.

The CRA maintains strict information security and confidentiality procedures. The CRA is well aware that the information they receive under this program constitutes sensitive intellectual property, and its dissemination may affect an organization's ability to compete. The CRA has enacted policy to ensure that SR&ED information is communicated on an as-needed basis, to the appropriately authorized personnel. At Mobile Capital Network, we are acutely aware of the need for confidentiality and information security. We employ several measures to ensure that all information is kept secure, and is only made available to our consultants on an as needed basis. In addition, all of our standard agreements contain confidentiality clauses and Mobile Capital Network will sign your organization's confidentiality agreements if further security is required.

One of the purposes of the SR&ED program is to help Canadian-based companies compete in the international community. The CRA recognizes that not all projects may not be commercially viable or have a commercial purpose. As long as the work undertaken meets the SR&ED eligibility criteria from a technological perspective and eligible expenditures have been made, then the project will qualify. Thus internal projects, skunk work projects, and experimental works may all qualify under the program regardless of their commercial status.

The 'proxy' method is a simplified method for the inclusion of SR&ED related overhead costs. Using this method, wages, materials, subcontract costs, leased costs and capital equipment may be claimed. More importantly, using the proxy method, wages are eligible for a 65% proxy increase to accommodate overhead costs. Due to the simplified filing requirements and relatively generous overhead calculation, the proxy method is the most popular method of filing a SR&ED claim.

The 'traditional' method for filing an SR&ED claim allows for the inclusion of specific overhead costs related to an SR&ED project, rather than using a general calculation for factoring overhead costs (as used in the proxy method). This method is typically used in organizations where salaries and wages are low, or compose a small fraction of the costs incurred in SR&ED eligible projects.

To estimate the potential size of your organization's SR&ED return, you may use our SR&ED return calculator, found here. Please note that the results of the calculator should be treated as an estimate. For a more accurate, no obligation assessment, please call us at 416.640.0620 or email us at info@mobilecapital.net

One of the major benefits of the SR&ED program is that returns are often in the form of cash. Depending on its corporate structure, your organization may be eligible to receive its SR&ED return as cash, or a mix of cash and tax credits. Because the SR&ED program works on eligible expenditures, having no taxable income will not affect your organization's ability to participate in the program. To determine whether your organization is eligible to receive a cash return for eligible work/expenditures, please call us at 416.640.0620 or email us at info@mobilecapital.net.

The CRA has established service standards for the processing of SR&ED claims. The CRA is committed to meeting these standards at least 90% of the time. Typically, cash refunds on joint filings are processed within 120 days, and 240 days for amended filings. In our experience, the CRA is often able to process the claims faster than the timelines noted above. For non-refundable claims, the CRA attempts to process claims within 365 days.

The CRA accepts a wide variety of information in support of a SR&ED project. Although this information is generally not included in the technical submission, your organization should be able to easily produce supporting information in the event of a claim review. Supporting documentation can take the form of:

• Project planning documents
• Records of resources allocated (time sheets)
• Design of experiments
• Project records, laboratory notebooks
• Design, system architecture and source code
• Records of trial runs
• Progress reports, minutes of meetings
• Test protocols, test data, analysis of results, conclusions
• Photographs and videos
• Samples, prototypes, scrap and other artefacts
• Contracts
• Other project related materials

In certain provinces, public companies are still eligible to receive cash as a part of their SR&ED return. For example, in Ontario, depending on the amount of capital, an organization may still be eligible to receive the provincial portion of its return in cash. Although the OITC is 10%, through the addition of the proxy amount for overhead, and the federal/provincial refund split, almost a third of return can be refunded as cash in Ontario. Alberta (starting Jan 1, 2009), Quebec, New Brunswick, Newfoundland & Labrador and Nova Scotia provincial governments also give public companies cash returns. To determine if your publicly traded corporation meets the criteria to receive provincial cash returns, please contact us.

Yes. Although most government funding assistance programs prevent the filing of SR&ED on government provided funds, your organization is still eligible to claim SR&ED on privately funded portions. For example, IRAP funds a portion of employee salaries and subcontracts. The portion your organization is required to co-fund is still SR&ED eligible. Moreover, if government assistance is in the form of interest-free or low interest loans, then the re-payable amounts are SR&ED-eligible once the repayments are made.

The table below indicates the current SR&ED tax credits offered in addition to the federal tax credits. Please note that each province has specific criteria in order to receive the indicated tax credits.

Yes it is possible. You can receive a substantial percentage of the expected return upfront. Please contact us for the details.

Mobile Capital Network provides two major SR&ED offerings. The first package is an end-to-end service, where MCN consultants prepare the entire SR&ED claim for an organization. This is the most typical type of service utilized by our clients. The second offering is an educational service offering, where we work with an organization to develop processes to create supporting documentation for SR&ED claims in the normal course of business. Please see the questions below for a complete description of each offering.

The MCN end-to-end service consists of four major components. Typically, the entire process requires an investment of 6-8 hours on the part of your organization. MCN can typically complete a SR&ED claim within 3-4 weeks, and can accommodate quicker turnarounds in the event of a submission hard deadline.

• Technical Report Preparation - Our technical consultants will interview your SR&ED participating technical staff. Typically, each interview lasts about 20-30 minutes per project, and requires no prior documentation on the part of your technical staff. Once the interviews are completed, your MCN technical consultant will prepare a complete technical submission for your SR&ED claim.

• T661 and Costing Preparation - Our financial consultants will work with your financial staff to gather all of the information required to complete a comprehensive costing analysis for each SR&ED eligible project. This includes preparation of the T661 and the supporting schedules.

• Proactive Time Tracking Assistance - One of the requirements of participation in the SR&ED program is to track time associated with SR&ED projects. This requirement does not need to be as cumbersome as often thought. MCN consultants can assist your organization in implementing a time tracking regime that is tailored to your organization's internal processes. MCN consultants can also provide seminars to your employees over the course of the year to ensure that all eligible activities are tracked, and employees understand the requirements of the SR&ED program.

• CRA Claim Review Assistance - In the event of a CRA review, MCN consultants will assist your organization prepare for the audit. First, MCN consultants will work with your team prior to the audit to ensure that they understand the various components of the submission. In addition, MCN consultants will attend the audit and assist your team in providing support for your SR&ED claim. Typically, all of the services noted above are provided for a single, contingency-based fee. For more information, please contact us.

The MCN educational service consists of three major components. This service is geared towards organizations who wish to complete their SR&ED claim internally, but would like third-party assistance with procedural items.

• Technical Report Review - Although MCN technical consultants will not prepare your organization's SR&ED technical submission, they will review the project reports to ensure that they conform to CRA requirements. In addition, MCN technical consultants will provide advice and direction on how to improve the contents of your organization's technical submission.

• Staff Seminars - MCN consultants will provide educational staff seminars on-site on a quarterly basis (or more frequently if required). MCN consultants will review the program requirements with attending staff to ensure they understand SR&ED eligible work versus routine work. This time can also be used by organizations to pose questions to MCN consultants regarding the eligibility of specific tasks already undertaken. Hard and soft copy materials will also be provided to help your staff understand the program.

• CRA Claim Review Assistance - In the event of a CRA review, MCN consultants will assist your organization prepare for the audit. MCN consultants will work with your team prior to the audit to ensure that they understand the various components of the submission. Typically, all of the services noted above are provided for a single annual fixed fee. For more information, please contact us.

Yes. When a client engages Mobile Capital Network to provide its end-to-end SR&ED services, MCN will provide all of the encompassing services for a single contingency fee. Moreover, there are no hidden costs, additional expenses etc., when MCN is engaged on a contingency fee basis.

Yes. MCN regularly assists clients with the implementation of tracking solutions in support of their SR&ED claims. MCN consultants can assist your organization in designing a time tracking solution that minimizes the impact on your organization, while simultaneously ensuring all eligible SR&ED activities are tracked. This assistance is an integral component of MCN's end-to-end SR&ED service. This service is also offered on a time and materials basis. For more information, please contact us.

Mobile Capital Network is a national R&D incentives services practice, based in Toronto, Ontario, Canada. MCN has consultants and clients nationwide.

The acronym IRAP stands for Industrial Research Assistance Program?

The National Research Council (NRC), an agency of the Canadian federal government, administers the IRAP program.

OIDMTC stands for Ontario Interactive Digital Media Tax Credit.

The Ontario Interactive Digital Media Tax Credit (OIDMTC) is a tax credit based on eligible Ontario labour expenditures and eligible marketing and distribution expenses claimed by a qualifying corporation with respect to interactive digital media products.

Yes. The OIDMTC is a refundable tax credit, which means the amount of the credit, less any Ontario taxes payable, will be paid to the qualifying corporation.

The OIDMTC is jointly administered by the Ontario Media Development Corporation (OMDC) – an agency of the Ministry of Culture – and the Ontario Ministry of Revenue. Application is made to the OMDC for a certificate of eligibility, which the corporation files with the Ontario Ministry of Revenue together with its tax return in order to claim the OIDMTC.

he OIDMTC refund rate is determined by your organization's corporate structure. Please see the table below for the OIDMTC refund rate per qualifying organization type.

¹ A qualifying small corporation is a Canadian corporation (it may be Canadian- or foreign-owned), that develops an eligible product at a permanent establishment in Ontario operated by it, had during the preceding taxation year (on an associated company basis) neither annual gross revenues in excess of $20 million nor total assets in excess of $10 million, and files an Ontario corporate tax return. ² The 25% tax credit applies to expenditures made after March 25, 2008. Prior to March 25, 2008, qualifying expenditures are refunded at a rate of 20%.

Corporations that are prescribed labour-sponsored venture capital corporations under the regulations made under the Income Tax Act (Canada) and corporations that are exempt from tax or are controlled directly or indirectly by a corporation exempt from tax are not eligible for the OIDMTC.

To be eligible for the OIDMTC a product must be an interactive digital media product whose primary purpose is to educate, inform, or entertain, and that achieves its primary purpose by presenting information in at least two of: (i) text, (ii) sound and (iii) images. Types of interactive digital media products that may be eligible for the tax credit include but are not restricted to games, educational or informational products.

In addition to the primary eligibility requirements of presenting at least two of: (i) text, (ii) sound and (iii) image, the following criteria must also be satisfied in order for a product to be eligible for the OIDMTC.

1. 1. All or substantially all of the product was developed in Ontario by the qualifying corporation or by the qualifying corporation and a qualifying predecessor corporation.
2. 2. The product was developed for sale or licensing by the qualifying corporation to one or more arm’s length parties who have not previously entered into an arrangement with the qualifying corporation or a qualifying predecessor corporation for the development of the product.
3. i. The product is not used primarily for interpersonal communication.
4. ii. The product is not used primarily to present or promote the qualifying corporation or a qualifying predecessor corporation.
5. iii. The product is not used primarily to present, promote or sell the products or services of the qualifying corporation or of a qualifying predecessor corporation.

It is not required to place an acknowledgement within the product for which an OIDMTC claim is filed. Should you wish to provide an acknowledgement for an Ontario tax credit, the OMDC suggests the following wording:  “with the assistance of the Government of Ontario – The Ontario Interactive Digital Media Tax Credit”.

Eligible labour expenditures are 100% of salaries and wages for employees incurred after June 30, 1998 and 50% of remuneration incurred after May 4, 1999 and paid to arm’s length persons who are not employees. "Persons" may include individuals, partnerships and corporations. Eligible marketing and distribution expenditures are expenditures directly attributable to advertising or promoting the eligible product or distributing the eligible product to customers or potential customers.

Eligible marketing and distribution costs may include:

• - Attending trade shows where the product is being promoted
• - Consultant fees for PR and marketing
• - Portion of wages and salaries of employee(s) attributable to specific product marketing and distribution
• - Advertising the product in print and electronic media (including design and preparation)
• - Preparing the product for display or demonstration
• - Product market research/focus group testing
• - Product visual identity: logos, branding, merchandising/promotional products e.g. mugs, shirts
• - In-store promotions (shelf space), product samples
• - Direct Mail Marketing/Telemarketing
• - Media kits/news releases (media lists)

There is no limit on the amount of eligible Ontario labour expenditures that may qualify and there are no per-project or annual corporate limits on the amount of the OIDMTC which may be claimed. Eligible marketing and distribution expenses are capped at $100,000 per eligible product.

A corporation submits an application for a Certificate of Eligibility at any time after all eligible products have been completed. The corporation may submit the application before the end of the taxation year if all eligible products have been completed before the end of the year. If the corporation has not incurred all eligible costs at the time of applying for an OIDMTC Certificate of Eligibility (i.e. there are additional marketing costs to be incurred) the corporation should submit cost schedules with projected expenditures up to the end of the taxation year in which the products were completed. To claim additional marketing and distribution expenditures on products certified in a previous taxation year a corporation should submit a new application for the taxation year that these additional marketing and distribution expenditures were incurred. Please note that each application is subject to an administration fee.

The Application Fee is calculated as 0.1 per cent of the total final Qualifying Expenditures (line 8, Part C of the application) for the application. The minimum Application Fee is $100 and the maximum Application Fee is $2,000 per application. For example, where qualifying expenditures total $200,000, the Application Fee is calculated as follows: Application Fee = Qualifying Expenditure x 0.001 = $200,000 x 0.001 = $200. The fee for a Preliminary Estimate is an additional $100.00 per product.

A Preliminary Assessment of an OIDMTC can be provided by the OMDC for products that have not yet been completed. A Preliminary Assessment is not required in order to obtain an OIDMTC Certificate of Eligibility and cannot be used to claim a tax credit with a tax return filed to the Ontario Ministry of Revenue. However, a Preliminary Assessment may be of assistance in projecting the amount of credit expected for a product or in determining whether an uncompleted product may be eligible for an OIDMTC. However, as the Preliminary Assessment is based on a description of the product, not a completed version, and on projected costs, not actual costs, it cannot be relied upon as accurate and will not guarantee that the OMDC will issue a Certificate of Eligibility. An administration fee of $100 will be required for each Preliminary Assessment requested. Preliminary Assessments will be issued per product, not for all products undertaken by the corporation in its taxation year.

A Certificate of Eligibility sets out (i) the eligibility of an applicant corporation; (ii) the eligibility of an applicant product(s); and (iii) the estimated amount of the OIDMTC. The amount of the OIDMTC is subject to verification by the Ontario Ministry of Revenue, Corporations Tax Branch.

Mobile Capital Network provides a comprehensive OIDMTC filing service. Our service offering consists of two steps. First, MCN consultants will assess your organization's product, and prepare a product description. This description will be presented to the OMDC for a preliminary assessment. Once a positive assessment is received, MCN business and financial consultants will prepare an application for a Certificate of Eligibility, including all of the necessary costing schedules. Once submitted, MCN will track the application with the OMDC to ensure that the application is processed as quickly as possible.

Yes. For clients who take advantage of one of MCN's SR&ED services, MCN will provide its OIDMTC services to qualifying organizations on a contingency basis. Fees for the preparation of an OIDMTC claim are due once the Certificate of Eligibility has been issued to the organization. For clients who do not use any of MCN's SR&ED services, MCN provides a fixed fee service. MCN will provide the same two step service, however, fees are due upon the completion of the application for the Certificate of Eligibility. For more information, about our OIDMTC services, please contact us.

No. For its OIDMTC services, MCN does not charge success (or contingency) fees that are based on the percentage return. This is due to the fact that the application process is the same process per product, and the amount of work effort varies only slightly between each project. MCN charges a fixed fee per OIDMTC application filed. For more information, about our OIDMTC services, please contact us.

No. MCN account managers will clearly set out the fixed fee with your organization. In addition, our agreements state that there will be no other fees, expenses etc.

Mobile Capital Network is a national R&D incentives services practice, based in Toronto, Ontario, Canada. MCN has consultants and clients nationwide. However, please note that the OIDMTC is only available to organizations that have an operation in Ontario.

BC IDMTC stands for British Columbia Interactive Digital Media Tax Credit. The tax credit is also referred to as the IDMTC or Interactive Digital Media Tax Credit.

The Interactive Digital Media Tax Credit (IDMTC) is a tax credit based on eligible British Columbia wages and salary claimed by a qualifying corporation with respect to interactive digital media products. The program was initiated on August 31, 2010 and is scheduled to close September 1, 2015.

Yes. The IDMTC is a refundable tax credit, which means the amount of the credit, less any British Columbia taxes payable, will be paid to the qualifying corporation.

The IDMTC is administered by the Income Taxation Branch of the British Columbia Ministry of Finance. The Canada Revenue Agency (CRA) is responsible for reviews and audits of claims under the program and will also be responsible for issuing cheques where appropriate.

The IDMTC program is refundable at a rate of 17.5% on eligible wages and salary incurred by eligible corporations, developing interactive digital media products in British Columbia.

A corporation can register for the IDMTC if it meets all of the criteria below:

• has a permanent establishment in British Columbia;
• is a taxable Canadian corporation for the duration of the fiscal year;
• has more than $100,000 of eligible wages and salaries; AND
• either
• its principal business is developing interactive digital media products, OR
• all or substantially all of its business consists of:
• developing interactive digital media products; and/or
• providing eligible activities to corporations that have a permanent establishment in BC and whose principal business is developing interactive digital media products.

A corporation cannot register for the IDMTC for a given tax year if it has or is:

• exempt from taxes, or has taxable income exemptions;
• a labour-sponsored venture capital corporation;
• a registered employee share ownership plan;
• a registered employee venture capital corporation;
• a registered small business venture capital corporation;
• a registered eligible business corporation;
• controlled directly or indirectly in any manner by one or more of the above corporations;
• claims a BC SR&ED tax credit for the given tax year;
• a personal services business.

Interative Digital Media (IDM) products are the only products allowed to be claimed under the IDMTC. An IDM product for the purposes of the IDMTC is a product developed in British Columbia, made for use by an individual, the primary purpose of which is to educate, entertain or inform. The product must include a combination of at least two methods of presenting information: (i) text, (ii) sound and (iii) images. This may include video games.

Certain products are specifically excluded as per the IDMTC regulations. Products that are:

• operating system software;
• designed to be used for interactive communication;
• classified by the Entertainment Software Rating Board as "AO" (Adults Only);
• designed for marketing or promoting an entity, product or idea; or
• which may be contrary to public policy.

Under the IDMTC, wages and salaries directly attributable to the development of an IDM product are eligible. Further, wages and salaries must be:

1. incurred on or after September 1, 2010;
2. directly attributable to eligible activities; and
3. paid to individuals who were resident in BC on December 31 of the year preceding the end of the corporation's tax year.

In addition, eligible salaries and wages are reduced by any assistance, other than the Federal SR&ED program. IDMTC eligible wages and salaries do not include:

•Stock options;
•Amounts paid to specified employees (i.e. persons holding 10% or more of the shares of the company):
•based on profits or a bonus;
•in excess of five time the year's maximum pensionable earnings
•Amounts paid to employees for performing marketing, human resource services, administrative support services, or management services
•Amounts paid to contractors or sub-contractors

Marketing, human resource services, administrative support and management support expenditures are not eligible under the program.

There is no expenditure limit with respect to the BC IDMTC.However, a minimum $100,000 must be spent on eligible salaries and wages per fiscal year in order to apply.

An application (Schedule 429) must be filed with the CRA within 18 months of the end of a corporation's fiscal year. A T2 must also be filed with the CRA for given fiscal year. Applications filed after the 18 month deadline will not be accepted. Ideally, an IDMTC application should be submitted along with the T2, no later than six months after the end of a corporation's fiscal year.

The amount of the fee is based on the number of employees at the end of the corporation's previous taxation year. If the corporation has no previous taxation year, the lowest fee will apply.

* ‘Employees’ includes all full or part time equivalents.

Mobile Capital Network provides a comprehensive IDMTC filing service. Our service offering consists of two steps. First, MCN consultants will assess your organization's product, and prepare a product description. MCN business and financial consultants will prepare an application including all of the necessary costing schedules. Once submitted, MCN will track the application to ensure that the application is processed as quickly as possible.

For more information regarding MCN and the services it provides in support of the BC IDMTC, please contact us.

Mobile Capital Network is a national R&D incentives services practice, based in Toronto, Ontario, Canada. MCN has consultants and clients nationwide. However, please note that the IDMTC is only available to organizations that have an operation in British Columbia.