This article is light on facts (which is surprising to see in the wsj). This program is called Scientific Research and Experimental Development Tax Incentive Program. And, qualifying for a full SR&ED isn't as easy as they make it sound. To learn more, visit:
The trick to SRED is to hire an outside expert who will work on contingency to get a percentage of the SRED rebate they generate. There are many companies providing this service. These folks are experts on writing the necessary reports/forms given your engineers have written detailed logs of their work. Don't try to do SRED yourself. It's just one of those things, like hiring a lawyer, where it's complete lunacy to do it yourself.
SR&ED consultants are simply exploiting a knowledge gap for serious profits. If you can, you should find someone who can help you and give advice, but don't give away 10%+ of the return.
Or like myself, hire a firm once in your career, assist to the free government course and do it yourself in the future. The trick is really learning what they are looking for in the write up and scientific audit. The rest of the claim is easy. And once you're approved, you usually don't get audited thereafter.
The trick to SRED is to hire an outside expert who will work on contingency to get a percentage of the SRED rebate they generate.
This is the scam of SRED. It is unfortunate that we are at this place.
There is absolutely nothing difficult about SRED (it is absolutely no more difficult than any other completely banal corporate submission), beyond understanding the magic terminology and phrasing that will get your submission accepted as is. That a whole business of vampire consultants exist around exploiting that, with agreement from Revenue Canada, is the real lunacy. It undermines the efficacy of the program.
+ 100. I find it revolting and scammy that tech companies have to get outside "consultants" to help fill out the paperwork. I've heard stories where some consultants worked for the program itself in the past. How can Canada piss away so many tax dollars is beyond me.
I think this is an overreaction. Why? Let's be honest. If you're the stereotypical 150-IQ, borderline-Aspie tech co-founder, you're going to have to find a business co-founder with connections. He's going to take a huge cut, and you're going to do more work. That's just how the system's set up. Then you deal with venture capitalists, who can pretty much set terms unilaterally because of their inappropriate and collusive influence over what everyone else thinks of you and your company.
If I'm an entrepreneur in need of capital, I'd rather pay a 10% tribute to someone who knows the paperwork than the current 90+ percent tribute (to people who can make introductions, people with sales skill, makers of reputations) of Silicon Valley.
With all due respect, you should read more about the SR&ED before you call someone's legitimate criticism an overreaction. It is a program designed to pay back a portion of salaries that go into scientific research or development. This isn't new capital, it is a rebate program where you earn back a portion of salaries that you have already paid.
The challenge in SR&ED is convincing the bureaucrats in charge of the program that the salaries you're asking for a rebate on actually went into advancing the state of technology. One problem is that many of the bureaucrats who work in this program come from accounting backgrounds. Hence the statement that you need to make sure your application contains the magic words that will get an application through.
In practice, the odds of an inventor receiving a full shred if she fills out her own application are nearly zero. So, to take part in a program like this, tech companies need to allocate ~7.5% of their annual research salaries to a shred specialist.
I'm Canadian and I pay taxes, so I have a few problems with this program. It is yet another program where you need an expert to sit in between the relevant business and the government. And, it's a perfect example of a Canadian government program where bureaucracy overwhelms the purpose.
But, as someone who works in tech and has gone through a few shred processes, this program seems crazy. Who is better qualified to explain an invention than the inventors themselves? And, if you need a gatekeeper to explain your innovation, are the bureaucrats involved competent enough to administer a program like this?
Those are important questions for Canadian taxpayers and are most certainly not an overreaction. Your feelings about the VC industry are obvious, but in this case, they aren't very relevant.
Oh I completely agree. SRED shouldn't be difficult. I think the actual practice is more complicated though, having had to go through it. If you do it on your own you risk leaving a whole lot of money on the table, opening yourself up to a filing which won't stand up to an audit, or both. It's just one of those things I'd rather leave to somebody who deals with Revenue Canada on the same issue day in and day out. There are pretty scummy companies doing SRED returns but there are also decent ones who are professional and above board.
http://www.cra-arc.gc.ca/txcrdt/sred-rsde/menu-eng.html