Early April, 2009

What hurdles do you have to jump?

Often taxpayers are confused about what activities are eligible as SRED.  If you are one of them, for you we list below some key characteristics of SRED activities.  Since most of the people we deal with are dealing in experimental development rather than basic research, we are presenting these guidelines with them in mind.  If you are involved in basic or applied research, talk to us and we can help you adapt these items to your case.

1. You must be seeking a technological advancement. 

2. You must not know at the outset how to achieve it.  In other words you must begin with technological uncertainty.  If you already know how to resolve the problem then you aren’t really adding to your knowledge base and the SRED program is intended to promote the development of knowledge.

3. There must be a systematic effort to reduce the technological uncertainty and achieve the technological advancement.  “Systematic” has to do with the efforts being organized. You have a hypothesis and you test it.  Your hypothesis may turn out to be valid or it may not.  It doesn’t matter.

4.  The people you involve in the project must have training applicable to what you are trying to do.  This might be by formal education or by experience.  You cannot claim as SRED expense the cost of an accountant with no scientific training experimenting in a laboratory to achieve a bio-chemical breakthrough. 

5. The knowledge you develop must not be “standard engineering process”: it must not be usually taught in a classroom or available in a textbook.  If it is, then it would already be knowledge that theoretically is within your grasp and would not be a new development for you.  If the knowledge is in the public domain, it isn’t SRED to develop it.  If it exists, but is proprietary and would cost you something to obtain, then you may seek to acquire it through SRED activities.




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