A CEO friend of mine ‘heard’ that SR&ED and IRAP were ‘giving away big money this year’. So, his follow on questions were: what is it? how do we get it? what changes were there?
In this entry I’ll tackle NRC-IRAP (pronounced: i-wrap) which stands for the National Research Council (NRC) Industrial Research Assistance Program (IRAP). Click here for the SR&ED coverage. The NRC is promoting research and development activities for small and medium sized businesses through a grant program (they call it “non-repayable financial assistance”). Unlike SR&ED where you apply for annual tax incentives for work that already occurred in the year, with IRAP you submit a proposal in advance of the project which helps ‘pay the bills’ (after project acceptance you submit monthly reports and receive cash in return) while you are developing the technology.
To qualify, the company needs to be a Canadian corporation with fewer than 500 employees and be advancing its innovation capability by conducting R&D. The program only funds eligible in-house technical labor costs as well as some approved subcontracted labor costs. In general, the “project” must be novel, innovative, realistic for your company and advance your company’s technical capabilities. The project must involve technical risk and the project’s resulting product, process or service must have an economic benefit to your company. Projects can range up to $350,000 where you receive up to 50% funding to support certain activities (”cost-shared” grants). For a large project the payments are provided over 36 months.
To be honest the IRAP website is crap as far as providing detailed information. In order to apply for the grant you need to contact the local “Industrial Technology Advisor” who then walks you through the steps and provides guidance. Don’t they know they need to get online and let us ‘research’ them first before we want to pick up the phone?!?!
So, is ‘big money’ being given away this year? The project size limit hasn’t changed publicly so maybe it is because in the 2006-2007 year the NRC-IRAP ran out of contribution money early in the year so their budget may have increased this year. However, my CEO friend heard that a company got $200K! Do the math: 50% of $350,000 = $175,000 over 36 months. Hmmmm.
Time to trawl the boring Treasury Board of Canada Departmental Performance Reports (DPR) where I found the following in the 2005-2006 DPR for the NRC:
On average, NRC-IRAP’s client reach has been 2,500-3,000 funded clients annually with the maximum funding provided to any one client set at $500K per project.
Wow! Maybe there is some money to be had. No harm in picking up the phone and trying. Good luck!
4 comments ↓
For SR&ED Tax calculations you need to deduct everything that you get from IRAP from you total qualified expenses and then run your caculation. Here is an online SRED calculator - http://www.rdtax.ca/SRED-tax-calculator.shtml -if found. It seems fairly accurate.
Found your blog on SRED/IRAP interesting and helpful but still have one question. What is the main benefit of one program over the other?
Cash! Thanks for the comment FVA. For small companies cash is everything. With IRAP you get the cash while you are doing the project which helps fund it. With SRED you usually get the money at the end of the project (with your tax return). Sometimes it just boils down to cash management and timing. Also, IRAP is about creating jobs and SRED is about truly advancing a technology so sometimes it is easier to get IRAP funding.
It is not an either/or thing. You want both
You file your SRED claim at the end of the year and assuming you’ve done it properly the government WILL give you a refund of a percentage of all the out of pocket expenses incurred in the previous year related to technological developments you worked on.
IRAP needs to be applied for BEFORE you do the work. IF you are approved they will give a percentage of teh costs incurred (and only related to salaries/contracts) so you will still be out of pocket for anything that is non-salary and the percentage of the salaries not paid for. This you can make a claim for in the following year SRED claim
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