The Case for Using SR&ED, OIDMTC, IRAP and Other Government Incentives

As consultants we meet with many different companies and, to our surprise, a substantial number of business owners, particularly owners-managers, are reluctant to tap into the government incentives available to them. Somehow these very capable, self-made, independent businesspeople perceive applying for government assistance or tax credits as an acknowledgement of their inability to succeed on their own. The most prevailing excuse is “it’s too much hassle to deal with the government”.

Consider that by maximizing your benefits from various government programs and incentives you actually help the government to achieve their public policy objectives. It may sound funny, but the government needs you. Don’t be shy to apply.

Take for example SR&ED. The Federal government uses the Scientific Research & Experimental Development (SR&ED) program to give Canadian industries a competitive edge over international companies. The purpose of the program is to encourage SR&ED activities by reducing the amount of business and financial risks associated with them. This has very practical implications. It’s obvious that by fostering SR&ED the government helps Canadian companies to become more competitive. Less obvious and, probably, most important is that the governments helps create high-paying skilled technical and engineering jobs in Canada, which is one of the government’s political objectives.

The SR&ED program offers the greatest rewards for T4 labor expenditures, creating tax revenue for the government, CPP and EI contributions etc. In fact, the SR&ED program has been generating “profit” for the government from its inception, as each dollar paid as SR&ED benefits results in more than one dollar of tax revenues. This is why the definition of technology in SR&ED program is purposely broad so that many skilled manufacturing and machining companies qualify for the program.
SR&ED is just one of the programs available to qualified Canadian businesses. IRAP, OIDMTC, SDTF, are others to name just a few. In fact, across all Canadian provinces there are close to 1500! Various provincial programs designed to assist specific industries and aimed at achieving particular policy objectives of provincial governments. Add to this hundreds of federally available programs and you see how determined the governments of all levels are to financially support businesses that help them in reaching their goals. If your business is one of them, not taking the money from the government is akin to not taking money from a customer for the goods you’ve sold or the service you have provided.

Now is actually a very good time to ask governments for money. The governments typically spend during recessions to compensate for the lack of spending from other sources. Canada is no different and the recent Federal budget includes expanded provisions for SR&ED, additional funding for IRAP as well as multiple other incentives and programs. The Ontario government among other incentives has also announced increases to OIDMTC, an additional tax credit for SR&ED work, and more amenable qualifying rules for OITC. So while accounts payable pile up, governments are prepared to cushion cash flow of the businesses engaged in “priority” activities or representing “priority” industries. Why not to take advantage of the opportunity? It makes little sense to leave money on the table during good times. It makes even less sense when we are in recession.

The government actually wants you to apply for available programs as by utilizing these programs you help the government to achieve its own objectives. Granted that preparing an application requires special knowledge and expertise, but this expertise doesn’t have to be “in-house” and is available. If you are interested in exploring government programs and incentives geared to your business, please, contact us for a free consultation.