If you pay a checkoff to an organization, you are eligible to claim part of that checkoff — the percentage that goes to support research projects — as a tax credit under the Scientific Research & Experimental Development (SR&ED) program. If your checkoff is $150 and 50 per cent goes to research, you can claim $75 as a tax credit. Many farmers spend a lot more than that, in terms of time and materials, tinkering in their own shops, trying to modify machinery or make new tools to do a job better. You may not know it, but you can get an SR&ED tax credit for your own investment, too. The claim for the credit is filed with your income tax.
When the claim is received, the reviewers will look for three things: Uncertainty in the outcome (it can’t be obvious or routine; there has to be some chance that it won’t work), a systematic process (showing you did think about how you were going to proceed) and some increase of knowledge (called an advancement; it need not always be major). Thus written notes of what you wanted to achieve, what you did, what went wrong, what went right, and what you learned will strongly help in your application.
It doesn’t have to be a commercial product. It can be for your own on-farm use, but it has to be something that helps you farm better by saving time, energy or consumables: for example, a new potato washer, an improved irrigation system, a cattle waterer, new mixing blades, or a self-propelled auger.
Tax breaks are bigger if your farm is incorporated. Since the largest eligible amount is usually the time spent, make sure you pay yourself a decent research salary and keep track of your hours thinking, constructing and testing. (Activities in support of an experiment are themselves eligible.) Also keep receipts for items used or destroyed. And, if your operation is big enough, it may make tax sense to have one or two persons dedicated to salaried research, or even an R&D subsidiary.
We know that lots of on-farm inventors read Grainews. This is just a quick primer to get you thinking about this tax credit opportunity. For more information, see the website at www.cra-arc.gc.ca/sred/Tofind an advisor with experience with these credits, contact the Canadian Association of Farm Advisors at www.cafanet.comor call 1-877-474-2871.
Thanks to Ken Bell, CAFA member, with Incentive Access Group in Surrey, B. C., for input to this article. Contact him at 604-572-9548 ext. 320 or [email protected]