March 1, 2005
A new program in eastern Ontario is turning $10,000 into over $350,000 for local manufacturers.
In 2003 the Stormont, Dundas and Glengarry Community Futures Development Corporation (CFDC) launched a pilot project to encourage local manufacturers to file for Scientific Research and Experimental Development (SR&ED) Tax Credits – a program intended to reimburse some of the costs associated with conducting research and development. Part of the incentive for companies to apply was a $2,500 subsidy offered by the CFDC to help cover professional fees associated with filing for the tax credits.
“The results were better than we could have imagined,” says Derrick Moodie, Acting Executive Director of the Stormont, Dundas and Glengarry CFDC. "Our total investment was $10,000 in the first year, and the combined total in tax credits for the four companies that we worked with was over $358,000.”
In the past, many companies did not file for the SR&ED tax credits because they were not aware of the program, did not think they would qualify, or did not think that their record keeping would support a claim. Some did not even realize they were involved in research and development activities. So, the CFDC launched a pilot project to raise awareness about SR&ED and help businesses apply for the tax credits they deserve.
Initially the CFDC held an information session for local manufacturers. Speakers from Revenue Canada and the Ministry of Finance outlined the tax credit program and helped clarify what constitutes scientific research and experimental development. "This does not have to be white-lab-coat kind of research,” explains Moodie. “The companies we work with have been doing research and development on their manufacturing processes – making things stronger, better, faster, and cheaper.”
Following the information session, the CFDC promoted the initiative with businesses, encouraging them to apply for the SR&ED tax credits. Through on-site visits, CFDC staff identified four companies that were conducting activities that qualified for SR&ED credits. To support the application process, the CFDC provided four subsidies of $2,500 each to offset the professional fees associated with applying to the program. Only companies that had not previously filed for the tax credits were eligible for the subsidy.
Beyond the more than $358,000 received by the participating businesses, the program offers other benefits for the local economy. The ultimate outcome of the program is to give companies an incentive to engage in more research and development activities. This ensures they remain competitive on the world stage and brings growth, profits and success to the local enterprises. The companies that applied for the tax credits employ a workforce of approximately 50 employees. One of the companies, Maximum Metalworks of Summerstown, was able to hire four additional employees as a result.
The success of the pilot project has encouraged the CFDC to continue the program. They recognize the importance of research and development for the region, and are supporting local manufacturers in their research initiatives. The CFDC has approved funding for more subsidies, and are currently assisting four more companies with their application to the tax credit program