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The cannabis industry is very new, and its political history has led to a shortage of knowledge available on the plant. By necessity, most growers are doing some sort of research or testing to raise potency, raise yields, or reduce costs. But this research can be expensive, especially if things don’t quite go as planned.
Canada’s Scientific Research and Experimental Development (SR&ED) program and parallel local programs provide refundable tax credits to help support this research. (Yup, REFUNDABLE. You can get a check back, even if your company pays no taxes). The Canada Revenue Agency administers these programs for most areas, so applying for these credits is a matter of including the proper forms in your annual corporate tax return. Big to small cannabis companies also take the help of factoring companies Canada for working capital when they have payroll, annual fees, hydro or other bills or when they have big expenses coming up such as excise tax, equipment purchasing or business expansion that would normally require debt or dilution via equity raises.
What You Can Claim
Expenses are typically eligible if incurred directly as part of the research. Especially, claims can include:
Materials consumed by the testing or wasted when trials failed (>40% return on approved claims)
Salaries for the amount of their time that employees spent directly engaged in or supervising the work (>60% return)
Contractor fees for direct assistance to the research (>30% return)
Note that if personnel perform a variety of SR&ED and non-SR&ED work, you can only claim their SR&ED time. Likewise, if your materials remain helpful in the eventual solution or other tasks, they will not be eligible. So you might claim the expenses of a lighting system that did not work, but not the cost of hardware that you persisted in using after the tests.
Licensed producers of medical cannabis may not realize that they are performing scientific research or experimental development (SR&ED). However, upon closer inspection, such producers may well have eligible SR&ED activities that should be claimed.There is also Sr&ed eligibility in non-high-tech investigations and development.
The SR&ED tax program in Canada strives at giving firms an incentive to conduct research and development. In the medical marijuana industry, advances in research and development may involve production facilities that churn out new plant cultivars for disease resistance, the production of new fertilizer combinations that boost yield, or the growth of biological pest controls. The development of other cannabis products, such as creating new methods to assess cannabinoid concentration, could also be suitable for the tax credit.
The medical cannabis industry has been on the rise due to legalization in many places. It has created an environment where companies can engage in the production and research of medical marijuana within a legal framework. Post-production activities such as clinical trials on patients to evaluate their response to different doses may also qualify for the Sr&ed credits.
The SR&ED program in Canada is one of the most generous globally and is beneficial to both small and large companies. For example, a Canadian-controlled private corporation can recoup up to 66% of its eligible labor costs relating to research expenditure. A public company can recoup up to 38% of these expenses.
To claim the SR&ED tax incentive, you do not need to create a proposal and then wait for its approval. You just execute the experimental activities before making a claim. However, you must confirm the activities are eligible before claiming. Activities must be technological or scientific; the outcome must be unknown, and industry professionals must systematically perform and document the work.
How to Apply – Successfully.
The Sr&ed application format is complex, which is why it’s a great idea to consult with an experienced advisory team that can help ensure you’re not ignoring any element of the claim. Advisors who comprehend your sector can help you describe the role of R&D in your company, pinpoint exactly what is eligible, and enhance the quality of your submission. In short, they can help you facilitate the process. Capital now cannabis makes invoice payment terms irrelevant by buying your unpaid invoices and getting you the much-needed cash, allowing you to get back to business.
As a bonus, relying on experts to handle the complicated aspects of an application process or procedures means you don’t have to give your developers or engineers that difficult task. Instead, they can focus on what they do best: driving growth and innovation.
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