Recently Ajax Widgets Inc. (name changed) received a cheque for $7568 from the BC government and $23838 from the federal government as rebates against the research and development work they did last year.
That’s $31,406 back out of a total spend of $113927, smiles Jack , company president.
Jack’s firm manufactures plastic machine parts. Last year he came across a cheaper raw material which seemed to be identical in every way to the existing one. Initial testing showed the new plastic to have similar tensile strength and temperature tolerance qualities to the material they are already using. It’s a whole lot cheaper too!
‘I was a happy man. I just cut my raw material costs by more than half’ smiles Jack. ‘Then came the headaches…’
‘It turns out the new material shrinks a bit more post casting, so we needed to resize the moulds.We were not sure of the proper dimensions and could only determine them through trial and error.’
‘I could almost see the money flying out the door! We had to do lots of trials on the moulds. It took weeks. All that labor, all the plastic plus we called in an engineer to help. She cost nearly $7000, maybe $40,000 more in labour, materials… it hurt!’
‘In my mind, all that money was well spent… over time I’d recoup the cost through lower materials costs… gotta break a few eggs to make an omelet…’
When the folks at SRED Consultants phoned me I was intrigued. I’d never heard of ‘SR&ED’ and frankly I’m not much for government and government forms…
Anyhow, these guys did all the work… we just carried on as normal and about 4 months after the claim was submitted, we got cheques for $30k.’
Unlike our regular accountant, these guys work on a contingency. They specialize in SR&ED and made sure to maximize my credits.
All round a Good Job!
The account above has had details changed to protect client’s identity.
This month’s FAQ: Are shareholders’ wages eligible for the SRED refund?
RESPONSE: If the shareholder in question owns 10% or more of the corporation, he is a “specified employee” and if the claim is being made with the traditional method, the claim for his wages is limited to 5 times his “insurable earnings”.If the claim is made using the proxy method, the extra 65 percent expense claimable upon his wage expense via the proxy method is limited to a maximum of 75% of his total wage for the year.Of course, this all assumes that this specified employee engaged in SR&ED activities during the year under claim.
