Farming Innovations That Qualify for Tax Credits

Farming plays a huge role in the economy as it provides the base ingredients for the manufacture of items like cooking oil, spirits and even fuel. Generous federal and provincial SR&ED tax incentives exist to reward farmers for developing new and improved farming processes and techniques.

In Canada, Canadian Controlled Private Corporations, partnerships as well as sole proprietorships may qualify for the SR&ED tax incentives for qualified expenditures. Expenditures such as wages, materials, machinery, equipment and SR&ED contracts are considered acceptable expenses under the program, which is administered by the CRA (Canada Revenue Agency). Consumer testing is also considered an eligible expense if it is an analytical part of the SR&ED process.

Farmers can benefit from the tax credit by engaging in projects that improve stock feed, breeding, pest management, crop development or harvesting. Generally, if you develop a new product or have found a way to reduce your environmental impact as a farmer, you are likely to qualify for the SR&ED credit. Examples include customizing farm equipment or finding innovative ways to improve water, energy or nutrient consumption.

The basic criteria that must be met in order to qualify for the SR&ED tax incentive are:

• Activities involve a degree of uncertainty;
• The outcome would not be known prior to the experiment by an expert in the field. The outcome does not have to be successful to qualify;
• The project is developed using a scientific method;
• Records and documents must be kept to support the claim. These can include invoices and test results.

Farmers should evaluate their activities in relation to the SR&ED tax program. They may be engaging in qualifying activities but not claiming them. If you are unsure whether your activities qualify or need assistance in preparing a claim, feel free to contact the experts at Swanson Reed R&D Tax advisors.