Canada's R&D tax credit program hurts R&D in Canada
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Re: Canada's R&D tax credit program hurts R&D in Canada
#2I'd also mention that what counts as 'R&D' is often paper thin. Normal developer activities can count if they are spun correctly.
Whether that's a problem depends on the amount that you think of this as a general small business tax credit vs an incentive to do research.
Re: Canada's R&D tax credit program hurts R&D in Canada
#3The SR&ED reporting process is a nightmare. I once spent 170 hrs. defending a piddling $100K claim. Hell is spending 8 hrs. in a room trying to explain polymorphism and encapsulation to an accountant. The whole process is geared towards engineering, physical processes and manufacturing. The subtleties and abstraction of software development make it look like we take no risks.
The time-tracking requirements seriously degrade your productivity.
I joked that if you discovered time travel, you wouldn't qualify for SR&ED because you were successful, so there was obviously no risk involved, ergo you don't qualify.
Re: Canada's R&D tax credit program hurts R&D in Canada
#4The SR&ED reporting process is a nightmare. I once spent 170 hrs. defending a piddling $100K claim. Hell is spending 8 hrs. in a room trying to explain polymorphism and encapsulation to an accountant. The whole process is geared towards engineering, physical processes and manufacturing. The subtleties and abstraction of software development make it look like we take no risks. The time-tracking requirements seriously…
>"I joked that if you discovered time travel, you wouldn't qualify for SR&ED because you were successful, so there was obviously no risk involved, ergo you don't qualify."
You could even be prosecuted for tax avoidance, given the vague standard.
Re: Canada's R&D tax credit program hurts R&D in Canada
#5SR&ED is a terrible program that is actively hostile to software startups.
To begin with under the definition of what the program considers claimable, in the strictest sense, most software work doesn't actually qualify, but the program is so poorly administered that most of them are able to successfully claim it anyways so they try, however you are always under the risk that your claim will be denied or clawed back.
Adding to this problem for startups, first time claimants have a much higher chance of being audited, as well as any time a claim increases significantly over the previous year (think high growth company). If an audit goes poorly enough you can also have previous years claims clawed back.
Then there is the time wasted in preparing and submitting, the pedantic time tracking that startups implement which is a drag on development teams in order to file these claims.
Finally, because the process is confusing and daunting enough most companies will hire a SR&ED consultant to file the claim for them where they will likely pay around 20% of the total claim.
In short, SR&ED is a great program for consultants to siphon money from tax payers but a terrible program for funding innovative startups.
Re: Canada's R&D tax credit program hurts R&D in Canada
#6"there are some bad unintended consequences" != "SR&ED Hurts Canadian Innovation"
Re: Canada's R&D tax credit program hurts R&D in Canada
#7It's great getting that money back and the author makes some good points about the shortcomings of the program, but as a recipient of this credit 3 years in a row now (just got our 2015 claim approved in record time), here's my issue with it: It just seems like a handout for optics' sake.
In my circle of fellow SR&ED recipients, none of us have ever said "Well if it wasn't for this program, we wouldn't have hired these people, built that, researched this etc."
Although in spirit it's meant to act as incentive to take risk, profit is all the motivation you need. I can't help but think that $4B could have been better spent on a few km of track for the subway in Toronto, for example.
Re: Canada's R&D tax credit program hurts R&D in Canada
#8SR&ED is a terrible program that is actively hostile to software startups. To begin with under the definition of what the program considers claimable, in the strictest sense, most software work doesn't actually qualify, but the program is so poorly administered that most of them are able to successfully claim it anyways so they try, however you are always under the risk that your claim will be denied or clawed back.…
On one hand you are saying that there's bad claims and on the other hand you complain about having to document and having audits.
All you are saying is true except the conclusion in the last sentence, which may be a valid point but doesn't follow from the other facts.
Re: Canada's R&D tax credit program hurts R&D in Canada
#9SR&ED is a terrible program that is actively hostile to software startups. To begin with under the definition of what the program considers claimable, in the strictest sense, most software work doesn't actually qualify, but the program is so poorly administered that most of them are able to successfully claim it anyways so they try, however you are always under the risk that your claim will be denied or clawed back.…
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Re: Canada's R&D tax credit program hurts R&D in Canada
#10It's great getting that money back and the author makes some good points about the shortcomings of the program, but as a recipient of this credit 3 years in a row now (just got our 2015 claim approved in record time), here's my issue with it: It just seems like a handout for optics' sake. In my circle of fellow SR&ED recipients, none of us have ever said "Well if it wasn't for this program, we wouldn't have hired the…
Isn't the goal to keep the R&D in Canada? It might make no difference to how a startup is run, but I could see it making a difference of where the startup is run.