SPECIAL FOCUS: CONSULTANTS’ FORUM
Funding innovation in engineering is critical to tackling climate change them can go a long way towards easing the costs of an engineering project. Consulting, municipal and industrial engineers are all eligible to make a claim. However, even in an industry as chalBy Richard Hoy lenging and complex as engineering, many professionals still neglect the tax t a time when there is a renewed incentives available for R&D because sense of vigour in the fight against they’re either not aware of the scheme or climate change in the wake of the they assume their work doesn’t qualify. United Nations Climate Change These are costly mistakes because the Conference (COP26), it’s clear that inno- government has been careful to make vation has a part to play and the private the rules quite broad, in order to spur sector has to be on board too. innovation in all walks of life. Canada has grappled with its stance Contractor costs qualify too, so comon climate change for decades now, try- panies using third-party engineering ing to balance a commitment to reduce expertise on R&D-related activity can emissions, while safeguarding the econ- still benefit. omy, which depends greatly on natural resources. WHAT EXACTLY IS SR&ED AND Change is on the horizon though, WHAT WORK QUALIFIES? and Prime Minister Justin Trudeau This rewarding tax incentive for innoannounced at COP26 that Canada will vation allows businesses to claim up to impose a hard cap on emissions from 41.5% of expenses incurred on R&Dthe oil and gas sector. Driving more related activity. This is a combination of innovation in environmental science federal and provincial incentives and it and engineering will help achieve these varies by province. ambitious targets, not just with oil and Not every cost associated with R&D gas, but with wastewater, air pollution, can be included in a claim. However, the construction and infrastructure. main qualifying expenses include staff The engineering industry, which con- costs, salaries, payments to contractors tinues to be of crucial importance to and third parties, and materials. these sectors, represents one of CanaThere are plenty of examples of innoda’s most innovative arenas. But compa- vative companies in past issues of Envinies large and small need the necessary ronmental Science & Engineering Magfunds to make the required research and azine, from innovation in water and development (R&D) a reality. While the wastewater to reducing pollution and federal government is making separate enforcing environmental protection. investments in this sector, tax credits are Projects undertaken at the new $1 often overlooked, despite how lucrative million water and wastewater treatthey can be. ment lab at the Southern Alberta Institute of Technology are likely to qualify WHAT IS AVAILABLE TO for SR&ED, as would recent developCOMPANIES IN THIS SECTOR? ments made by Waga Energy to deploy Tax credits for innovation are avail- its WAGABOX technology to convert able in Canada through the Scientific landfill gas to renewable natural gas in Research & Experimental Development Quebec. (SR&ED) program. Taking advantage of As a general rule, when it comes to identifying work that might qualify,
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there are three simple tests that must be met for innovation to be considered under these tax incentives. The work must: • Further technical knowledge or create advancement in the industry; • Overcome scientific or technological uncertainties; and, • Do something, by design, that other people would find hard or not obvious. SR&ED is not to be confused with the Industrial Research Assistance Program (IRAP), which is a government-funded grant program available to small- and medium-sized businesses, rather than a tax incentive for R&D. At a time when some engineering firms are struggling financially due to the long-term effects of the pandemic, and with many projects still being put on hold, now is the perfect moment to make sure you’re taking full advantage of what is available. MAKING A CLAIM The tax incentive for a private business is received as a cash payment and, for publicly traded companies, it is a credit to be offset against outstanding taxes. Seasoned tax advisers with experience of SR&ED claims know what qualifies and what doesn’t, but companies must keep good records of time and expenditure to support claims. Businesses can claim up to 18 months after the tax year in which the innovation took place, so there is a good chance that if you didn’t know about the scheme before, you could still claim substantial amounts retrospectively. Richard Hoy is president of Catax Canada. Email: richard.hoy@catax.com
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24 | December 2021
Environmental Science & Engineering Magazine
