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What are the Effects on SR&ED from the 2021 Federal Budget?
By Matt Mayer
Published On April 22, 2021
As the 2021 Federal Budget was released on Monday, April 19th, 2021, we at Braithwaite Canada have evaluated all 724 pages of the document to determine the effects on the SR&ED Tax Credit. This year’s budget unfortunately did not speak directly about SR&ED but focused more on innovation as a whole and extending some funding programs that will affect a companies SR&ED claim size. Below are some of the policies, programs, and extensions mentioned in the 2021 Federal Budget that will affect your companies SR&ED claim.
Canada Emergency Wage Subsidy (CEWS) Extended
CEWS has now been extended to September 25th, 2021. The government made it clear though that the rate of the subsidy will start to decrease beginning July 4th, 2021 as the government slowly wants to eliminate the subsidy. The July 4th date was determined based on the government’s COVID vaccine plan. With the SR&ED Tax Credit, companies must claim their CEWS subsidy when putting together their SR&ED claim. The subsidy will reduce a small portion of the salaries or wages of an employee claimed that was directly related to the SR&ED project.
Additional Funding for the Industrial Research Assistance Program (IRAP)
IRAP has been a long-standing program assisting small and medium-size companies relating to research and innovation. The technical reports written for the IRAP program are similar if not almost the same as the technical reports written for SR&ED. With the importance of innovation across Canada, the Federal Government added an additional $500 million to this program over the next 5 years. Essentially $100 million per year. When a company claims IRAP, you can still claim the SR&ED tax credit. A portion of the IRAP claim will cover some of the SR&ED claim lowering your companies SR&ED return but at the same time maximizing a company’s research and innovation as both can be claimed at one time.
Additional Funding for the Strategic Innovation Fund (SIF)
In continuing with promoting research and innovation, the Government of Canada will invest $7.2 billion over the next 7 years in the SIF fund. This additional funding is to help promote and increase innovation across Aerospace, Agriculture, Life-sciences, and the Automotive sector. An additional goal for the SIF funding is to lower gas emissions that can harm the daily lives of all Canadians.
As mentioned, the SR&ED tax credit was not supported directly in this 2021 budget. The SR&ED Tax Credit will continue to be the main focus for thousands of companies across Canada to bring job growth as well as innovative new products and services to market. We are hoping, especially with the IRAP Program to continue to see Canada flourish as a leading innovator around the globe.
For more information on the 2021 Federal Budget or assistance with IRAP or the SR&ED Tax Credit, please contact Braithwaite Canada today Contact Us.
Image Source: CTV News, Bell Media
Source: Government of Canada
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