Recycling and SR&ED

The recycling industry might be surprised to hear that they could qualify for a research and development tax credit. The government has worked hard to ensure no industry is excluded from this tax credit – they just want you to prove your claims.

The recycling industry may consider themselves all out of innovation, but the development of new or improved processes are common projects claimed on SR&ED tax credits in other industries. We’re hoping to shake industries out of this “lab coat syndrome” where managers are paralyzed by a preconception that only the scientific community can apply for these tax credits.

The recycling industry is rampant with SR&ED work, constantly altering and improving their process or developing entirely new systems. For instance, Li-Cycle, the largest lithium-ion battery recycling company in North America, regularly conducts R&D on their use of end-of-life batteries, creating new uses and benefitting both society and the environment. In another example, Merlin Plastics Group supports innovation that makes the plastic industry a dynamic part of the economy (e.g. sustainable plastic packaging). Any efforts into making plastic reusable, recyclable, or compostable are almost certainly qualifying projects. 

So here is what to consider. You should consider applying for the SR&ED tax credit if you are conducting work that:

  • Furthers the technical knowledge or advances the industry
  • Overcomes technical uncertainty
  • Follows a methodical process of experimentation to overcome these uncertainties

This tax credit considers relevant expenditures as qualified if they are in the following categories:

  • Staff wages or salaries (for time spent on R&D)
  • Contractor costs (for work done on R&D)
  • Supplies or raw materials 

The CRA wants you to apply, but they also want you to substantiate your claim – so keep a hold of financial records and project reports. Fortunately, for businesses that weren’t aware of the SR&ED program, they 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. 

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