SR&ED v. IRAP: What works for the business?
Two key pillars of Canadian government funding support for research and development (R&D) initiatives are the National Research Council of Canada Industrial Research Assistance Program (NRC IRAP) and the Scientific Research and Experimental Development (SR&ED) program. For Canadian businesses engaged in R&D activities, understanding the distinctive advantages of each program is important.
Grant - non-repayable funding for a beneficial project, received before and during the project to cover expenses
Tax credit - awarded to reduce income tax paid by the business, applicable at the time of tax filing
Accelerate R&D projects
Retroactive tax credits provided four (4) to twelve (12) months after approval for research projects
Up to 80% of internal technical labor and subcontractor expenses with no maximum funding limit
Covers up to 69% of labor and overhead costs, 36% of contractor costs, and 45% of material costs with no predefined funding limit
Approved applicants receive funding throughout the project
Tax credits applied during the annual tax filing
Technical R&D projects with a level of technical uncertainty
Projects conducted between April 1 and March 31, with potential durations exceeding 12 months for larger projects
Tax reimbursement provided relatively quickly after filing but may take up to twelve (12) months for certain applications
Stacking programs: A cautionary tale
While it is possible to stack IRAP and SR&ED funding, applicants must decide which expenses to include in each program based on project stages. Nor must it be forgotten that, in the case of IRAP funding, the applicant must be pre-approved (i.e., before the project commences) before spending. The decision to apply for these programs depends on project eligibility and financial considerations.
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