Daily Archives: February 23, 2015

12 posts

Continuous Improvement and SR&ED

We frequently encounter manufacturing companies that are significantly under claiming on their SR&ED tax credits. The biggest mistake we see is that many of these companies view their new product development efforts as the only area where SR&ED is occurring and forget to look at their manufacturing improvement efforts. The methodologies of effective manufacturing process improvement, such as the Deming cycle or Six Sigma, often satisfy the requirements of SR&ED eligibility. Companies are quite surprised at how this can SR&ED eligibility can impact the real cost of their improvement projects. Let’s look at an example: A manufacturing company uses a piece of equipment that has consumable wear inserts. During operation, these inserts are consumed (worn-out) and require monthly replacement. The company’s Manufacturing Engineer identifies a number of possible other materials or coatings designed to reduce the rate of wear on the insert but is uncertain how these other materials will […]

SR&ED Advice: Do Your Due Diligence!

On February 6, 2011, the Globe and Mail published an article entitled, “Dubious claims diminish R&D tax credit”. As is evident form its title, the article talks about abuse of SR&ED program and calls for action. In particular, the author, points to a “flood of dubious claims” that “is bogging down an already complex and unpredictable application process.” Unfortunately, the abuse of the program is a sad reality. We have seen it both from a consultant as well as from a claimant side. The CRA is acknowledging the problem and is contemplating various measures to counter them. The SR&ED program is fundamental to keeping highly skilled technologists in Canada, and it would be a grave political mistake to scrap it. Therefore the CRA’s response to the problem will likely come in a form of further enforcing compliance aspects of the program and subjecting more SR&ED claims to greater scrutiny. It […]

Choosing a Fiscal Year End

Working with many startups, MCN is often asked by its client to suggest fiscal year ends for companies. The CRA allows companies to choose any date as a fiscal year end, as long as it falls within 53 weeks of the date of incorporation. We typically recommend going with a fiscal year end that falls on July 31, unless there are particular circumstances that make a different date a better choice. There are several reasons why we make this recommendation: 1. A large percentage of companies have fiscal year ends that coincide with the calendar year end (i.e. December 31). December 31 is not only the most popular corporate fiscal year end, it is also the fiscal year end for all individual tax payers, sole proprietorships, as well as for most of the partnerships. Generally, the latter three cannot choose a different fiscal year end. This means that the next […]