Many businesses have a difficult time trying think of their R&D projects in terms of SR&ED. One of the toughest parts of a SRED consultant’s job is explaining the program and trying to get the people they talk to think “SRED-ily”.
SRED Tax Credits 101
The simplest way to describe it is SRED is not about the market value. It’s not about doing something that no one else has done. It’s not about building a new product that’s going to change the world. It’s about generating new knowledge through the process of developing that product. SRED is about the journey and the assumptions and decisions you had to make during that journey. As much as it is about the success of journey, it is even more so about failures and mistakes and unexpected twists and turns along that journey.
Examples from Real-World SRED Projects
As a subject matter expert in Computer Science and Software Engineering, you want to build an app or an add-on or plug-in. These are basics. Everyone knows how to do that. But if you build an app, add-on, or plug-in that works fine on Android or Chrome, but doesn’t work on iOS or Safari, and no one has published any potential solutions online through forums or blogs, and you wonder “how” you’re going to get it to work – that is where new knowledge begins. That is SR&ED.
As a subject matter expert in making bread, everyone knows how to make bread. But the SR&ED comes if you’re trying to make a gluten-free and vegan bread, and you follow all the suggestions you can find for doing so, but the bread keeps crumbling or is hard as a rock. If you’re a cosmetic science manufacturer and you’re trying to make vegan products without using beeswax, you may face the question of how to make a healing cold cream or sunscreen without the usual ingredients everyone else would use.
If you’re a food manufacturer or brewery, you encounter a packaging or food preparation issue that could be solved by installing a new machine, but your facility does not have the space for the suggested machinery, or the cost of the machinery is cost-prohibitive. Perhaps you invest in a new piece of machinery, and you’re having trouble maintaining product consistency or you’re experiencing too much waste, or the manufacturer states that it will do the job and even though you’re using as per their directions, it’s not doing what you need it to do.
Perhaps adding a part to your existing machine would solve your problem, but there is not one available on the market and you have to design it yourself, or you’ve found a piece of machinery used in a different industry that you hypothesize will do what you need, but your existing machine is not designed to work with that part, and you have to find a way.
Spot the Difference: Business thinking vs SRED thinking
One of the things our consultants are experts at is identifying these nuggets of SR&ED amongst sometimes seemingly ordinary and routine R&D activities. Sometimes – many times – it’s a matter of rephrasing something to more accurately describe the struggle (or “technological obstacle or challenge”) you faced along the journey.
Computer Science/Software Engineering
Business thinking: “We need to build an app/plug-in/add-on. The assumption is we can build an app/plug-in/add-on that will work on all devices.”
SRED thinking: You build the prototype and discover your assumption was incorrect. It doesn’t work on all devices. “We don’t know how to get our app/plug-in/add-on to work on iOS.” When you ran this app on this device, or run this plug-in on this browser, the device crashes, or generates an error message and you don’t know why or how to fix it. And there’s either no information available online, or, there was limited information available from online and some other subject matter experts. You tried those and they failed completely, or only got you part of the way, and you had to figure out how to get from there to the project objective.
Business thinking: “We need to make a gluten-free, vegan bread.”
SRED thinking: “We don’t know how to get the bread to hold together without using eggs. We tried alternative ingredients suggested by other gluten-free bakeries, but the bread still crumbled, or couldn’t be used within the constraints of being vegan.”
Food Preparation or Brewery
Business thinking: “The company was uncertain how to modify its equipment to prevent the breakage.”
SRED thinking: “The company was uncertain how to prevent the breakage given the constraints of its existing equipment and facility space.”
The first version of each of these implies that the company or researchers or developers knew they just had to modify the equipment or program/software somehow, and they were fairly confident it would work. That’s not SRED. The second version in each of these emphasises the uncertainty that the team knew modifications needed to be made, but didn’t know what modifications needed to be made or could be made within the constraints of their facility or technology available to them.
SRED is about translating what most companies say is the “WHAT are we going to do?” R&D concept to “HOW can we do this?” which is the SRED concept.
SRED is not about what you do with the technology or knowledge you have at your disposal, but what you do to the technology or knowledge you have at your disposal, or what might be missing from the technology or knowledge at your disposal. Sometimes the knowledge and technology available can only take you so far in your developmental journey. SRED is about bridging the gap between the limits of existing knowledge and the project objective that you’re trying to achieve or problem you’re trying to solve.
Let our SRED expert consultants help you connect the SR&ED dots of your R&D work and help you maximize your claim. It’s our job to make SRED as easy for you as possible.