YOU’RE LOOKING FOR BUSINESS TAX CREDIT FINANCING
IN CANADA - THE FILM AND SR&ED DOUBLE WHAMMY!
FINANCING YOUR SR ED CLAIM AND FILM CREDITS
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CRA Sred (SR&ED) and Film Tax Credits are quite a good example of the concept of success when it comes down to the question of ' art or science'. And that pertains to tax credit financing also; we maintain it shouldn’t be ' Adventure time' when it comes to the finance of your SRED or film, television and animation tax incentive credits. Let's dig in.
2 KEY REFUNDABLE TAX CREDIT PROGRAMS IN CANADA
It shouldn't be a secret (but unfortunately it is for many!) that Canada has some great (aka ' generous') business tax credits. In the case of our two examples:
SR&ED (sometimes called 'SRED ') - The actual name of the program is the Scientific Research And Experimental Development Program - aka ' sr&ed"
MEDIA
businesses in industry and entertainment can compete effectively with other businesses all over the world.
FILM / ANIMATION/ DIGITAL MEDIA CREDITS / SR&ED PROGRAM
CRA Sred claims, in many cases involve some element of information technology. And when it comes to the media industry - film, TV, and animation ' IT' technology has rapidly changed the entertainment industry. That bodes well for Canada of course as it ranks high in the world for trained people, country stability, and a strong banking and straightforward ( mostly !) tax and tax credit system. In summary, top experts tell us that Canada has one of the best overall environments for research and entrepreneurship in the world.
THE APPEAL OF THE CANADIAN DOLLAR
The Canadian dollar is certainly one factor in the cost and the financing of tax credit claims in research or film. In past times the 'Canuck buck’ reached parity and has somewhat backed off. We'll leave the currency predictions to the experts - we'll focus on the actual financing of your credits.
SR&ED:
The sr ed tax credit is a combination of federal and provincial incentives. On a broad basis, the thousands of companies that participate in the program receive a refundable credit (which can be financed for cash flow purposes) in the general area of 30% of their entire spend
CHANGES IN THE SR&ED PROGRAM
While the program was static for awhile some major changes happened over the last year or so. In some ways, these to a certain degree affect the financing of your claim, but not in a dramatic or negative fashion. One of those changes is the elimination of machinery and equipment acquired in your R&D tax credit work, so when it comes to financing your claim the overall financeable amount might in fact be lower given you can't claim assets acquired for research.
THE ROLE OF THE SR&ED CONSULTANT IN PREPARING YOUR CLAIM
One other ' change ' in the overall philosophy of the program was to focus on who was preparing your SR&ED claims and what they were charging. That probably struck fear and terror into the hearts of the SR&ED preparer industry - known as ' SR&ED Consultants '. As in all aspects of business the dust eventually settles and good credible honest consultants that charge a fair price will always survive.
FILM / TV/ANIMATION CRA CREDITS:
Canada film tax credit incentives are also very attractive tax credits - Producers of content in the media industry are eligible for tax credits also, and yes, they can be financed also! These credits are typically prepared by a qualified or experienced tax credit accountant - we suppose they are the media equivalent of the SRED Consultant.
Producers/owners of Canadian content simply put together a request around which they are Vis a Vis ownership, their budgets, productions costs, funds spent, etc - In effect it’s a business application.
WHAT AMOUNT OF FILM TAX INCENTIVES CAN YOUR PROJECT RECEIVE
Tax incentives in the media industry can range from anywhere up to 40-50% depending on what is spent and in what categories. Credits are a combo, again, of federal and provincial incentives. Provinces compete somewhat ferociously for your film, TV, animation or Transmedia projects as they view the employment and capital spending in this area a valuable commodity.
Our focus is financing these claims, and some may wonder why we talk about two very diverse credits - i.e. SRED and MEDIA. Our response - simply that in some cases even Media projects can file for SR&ED claims.
HOW DOES A REFUNDABLE TAX CREDIT LOAN WORK
And with respect to the actual financing of claims financing is very similar. Bridge loans on your SRED and Film credits are structured as loans with no payment and are reconciled at the end when the government sends you funds. Loans are typically in the 70% ' loan to value' area, and you receive the balance of funds, less financing costs when the government remits on your claim.
CONCLUSION
If you're interested in financing or getting some help with the financing of tax incentive claims seek out and speak to a trusted, credible and experienced Canadian business financing advisor who can eliminate a lot of the ' ADVENTURE’ when it comes to CRA SRED and FILM TAX CREDITS.
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Stan Prokop
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