Improving Canada’s SR&ED Program for Startups

Today, during Ontario’s Civic Holiday, I finally got around to filling out Deloitte Technology Fast 50™ CEO Survey. There was an interesting question that sparked a thread that I’ve been thinking about lately:

“Specifically, do you think the SR&ED tax credit program is pretty good as is, or needs improvement? If it needs big changes, what would be the first change you would make?”

For those of you who don’t know what the SR&ED program is, go learn more because it can save your business tons of cash over time and help you finance your business with non-dilutive government assistance.

For those of you running (or have previously run) early-stage stage startups, here are my thoughts: Currently SR&ED will refund a portion of a startup’s R&D costs based on expenses incurred during the previous year – some of those earliest expenses claimed were incurred 18 months prior to the claim. For startups, this is an eternity. Today, startups can grow and die violently before they get their first SR&ED claim, which could have helped them to pay one more employee, solve one more problem or help one more customer.

The Canadian government should consider modifying the SR&ED program to include a faster-reimbursement timeframe for startups (making less than $1,000,000 in revenue per year). For example, this could mean making claims quarterly and being reimbursed within 60-90 days – this would massively improve startup financing in the short-term. A modification, as requested, would help startups build value and growth potential more quickly and help the overall competitiveness of the Canadian technology sector.

Will anyone help to stand behind an initiative to get the Canadian government to improve the SR&ED program for startups? Join the conversation in the comments below.

4 thoughts on “Improving Canada’s SR&ED Program for Startups

  1. I've always found that reimbursements are fast – very fast actually, I seem to recall under 30 days at least once.  The claims themselves are tied your fiscal year and corporate tax return.  And of course, people do get audited and I don't think the gov't wants to have to do one every 90 days..

  2. I'd like to see SRED to die. I know several startups that should no longer exist who are stuck in Canada zombie limbo land for 5+ years.  One of them told me “our top sales guy is our SRED writer”.  Sigh.  (also it comes too late per your point)

  3. No doubt that the government doesn't want to have to do frequent audits. However, there could always be a disincentive put in place where if an audit shows that a company is gaming the system or cooking their books, they lose rights to apply for the startup SR&ED program.

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