Leverage IRAP Programs and SR&ED Tax Credits to Fund Your Innovation Projects
Being an innovative technology company in Canada doesn’t get any better than this: generous R&D tax credit incentives, funding for innovation projects, and funding for hiring educated employees. On top of this, you can leverage these incentives and funding programs at the same time.
The National Research Council (NRC) plays a big part is supporting these funding programs and focuses on “helping Canadian industry build its research and development capacity to advance Canada’s innovation performance.” NRC’s most successful initiative is the Industrial Research Assistance Program (IRAP), which has a planned budget of $240.7M for 2014-15.
In this blog post, we’re going to show you how to leverage IRAP funding and the SR&ED tax credit program to support your innovation projects. Before we can teach you how to leverage these programs, we should cover the basics:
What is IRAP?
The Industrial Research Assistance Program (IRAP) was created to help the growth of innovative SME’s in Canada. IRAP provides technical and business innovation advising, financial assistance, research and development “de-risking” and industry connections to over 10,000 SME’s annually. It is known as one of Canada’s best funding programs as it offers non-repayable financial assistance under the following subprograms:
1. Technology Innovation Projects
This subprogram provides grants to help firms fund research and development and/or commercialize technology projects. These projects are typically focused on creating original software, developing new products, or engaged in other various internal R&D projects. Funding ranges between $30K- $300K, with the program matching 50-80% of total project cost. The total project cost and allocated funding is determined by working with a Industry Technology Advisor (ITA).
2. Youth Employment Strategy Programs
The Youth Employment Strategy Programs, (commonly called “YEP”) provide SMEs with financial assistance to hire skilled post-secondary graduates in the following fields: science; engineering; technology; business; and liberal arts. Graduates work on innovative projects, including research, development and commercialization of technologies. The program shares a portion of the salary costs of the post-secondary graduate.
3. Business Innovation Access Program
The Business Innovation Access Program (or commonly called “BIAP”) is a pilot program that was launched in April 2014 that will provide $20M in funding over 2 years to help SME’s access business services or technical assistance at Canada’s learning institutions and publicly-funded research organizations.
Who is eligible for IRAP funding?
In order to be considered for IRAP funding, you must meet the basic eligibility criteria:
- Canadian SME, incorporated and profit-oriented
- 500 or less full-time employees
- Objective to grow and generate profits through development and commercialization of innovative, technology-driven new or improved products, services, or processes in Canada.\
If you meet this criteria and want to move forward, you must first contact a local Industry Technology Advisor (ITA) Your local ITA will determine your eligibility and help you submit a funding proposal for a specific project. We’ve included a list of helpful questions in our first blog post about IRAP found here.
When’s the deadline to apply for IRAP?
IRAP’s financial assistance programs don’t have application deadlines. With this in mind, we recommend getting in touch with an ITA before April 1 to learn more about their funding cycle and projects for the upcoming fiscal year. (Now would be a great time to touch base!)
Can you leverage both IRAP funding and SR&ED tax credits simultaneously?
Yes, you can! You can claim SR&ED-eligible expenses on the portion of the project that your company paid for. (As mentioned above, IRAP typically covers 50 – 80% of the cost, so your company will be responsible for the remaining amount).
Here’s an example on you can leverage both innovation funding programs:
Your Alberta-based SME has been approved for a $100,000 Technology Innovation Project to develop software that has never been developed before. IRAP has offered to cover 50% of the total project cost so your company will fund the remaining 50% (or $50,000). Assuming that $50,000 went towards a developer’s salary who spent 100% of his time on SR&ED-eligible work, your company could recover ~$32,000 worth of investment tax credits. As an SME, you’d qualify for a refundable tax credit. If all of your taxes have been paid that fiscal year, your company would receive a $32,000 cheque back from the government!
This is huge! If you add the $50,000 from IRAP and $32,000 from SR&ED, you’ll have received $82,000 in funding for a $100,000 project that enables your company to conduct R&D and compete in a globally competitive market.
Bonus: click here to download this 20-page SR&ED Guide to learn everything you need to know to prepare a successful claim.
Have some more questions about how to leverage both SR&ED and IRAP? Contact us.
For more information about IRAP programs, visit the NRC- IRAP website or call their toll-free number at 1-877-994-4727.
Want to learn about other Innovation Funding programs? Check out “Your Ultimate Guide to Innovation Funding – Western Canadian Edition.”