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SR ED TAX & FILM PRODUCTION TAX CREDIT FINANCE
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Financing & Cash flow are the biggest issues facing business today
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Oakville, Ontario
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Government tax credits. While many view SRED (SR&ED), Film, Animation and other non-refundable tax credits as the proverbial cash grab we try hard not to weigh in too much on the merits or non-merits around this area of the ' public purse'.
SR&ED AND FILM MEDIA TAX CREDITS CAN BE FINANCED
What we do weigh in on though is the fact that numerous types of tax credits are 100% financeable in Canada, so whether it's a SRED manufacturing or software credit or a film TV or animation project we want to ensure Canadian business owners, producers, etc understand that tax credits can be ' cash flowed '! Let's dig in. The SRED program is formally called the Scientific Research And Experimental Development Program - aka ' SR&ED !
CANADA'S SRED PROGRAM
The SRED program has been around a long time - it has undergone fairly significant changes recently but still is relatively intact, and, as we said financeable, as always, in the same manner. While the focus of the government is to ensure that SRED claims aid in the technological advancement of Canadian business owners and managers simply want to stay competitive, grow their company, and know they can if needed, finance their tax credits.
WHO CLAIMS SR&ED CREDITS EVERY YEAR? YOUR COMPETITION!
Somewhere between 3-4 Billion dollars each year are claimed by companies who, either on their own or with the aid of a SR&ED consultant file claims. Canada Revenue Agency administers the SR&ED claim process.
SR&ED CONSULTANTS PLAY A KEY ROLE IN PREPARATION OF YOUR CLAIM
When you finance a SRED claim it does not have to have final approval Vis a Vis a final audit, etc. We do hasten to add though that while a claim prepared by yourself is financeable, typically more weight is provided when it is prepared by a professional.
HOW DO FILM TAX CREDITS WORK? THEY CAN BE FINANCED ALSO!
The other area of government tax credits in Canada that are quite popular, and oh so non-related, is the credits that are available in the FILM, TV, and DIGITAL MEDIA/ANIMATION industry. These credits can help to provide total financing for projects pretty well up to the 40% range. While SRED claims focus on inventing or improving a process or a product the media credits tend to simply be in projects that inform or entertain. It is interesting to note in some cases that a film//TV/animation project might also have a SR&ED claim attached to it. Talk about a double whammy.
Clients are often asking what is in fact eligible spend on the media-type projects. Its things like salaries and wages, tangible expenditures, service contracts, etc.
CANADA HAS A STRONG REPUTATION IN THE TAX CREDIT AREA FOR FILM AND SR&ED
Canadian tax credits compete with American and European jurisdictions who in fact offer similar programs. It’s quite acknowledged that the Canadian tax credits are in fact the best, certainly they seem to have proven to be most reliable. For certain media tax credits, you require a pre-approval certificate from the government and key personnel, i.e. the producer for example should be a Canadian citizen.
CONCLUSION
The area of refundable tax credit claims doesn't have to be a complex area when it comes to financing. You want to be eligible for the tax incentives that are allowed under provincial and federal jurisdictions. Only private Canadian controlled companies are eligible for SR&ED claims. If you have a good SRED consultant, or a solid Canadian tax credit budget a trusted, credible and experienced Canadian business financing advisor can assist you in cash flowing your non-refundable credits into working capital for your company or project. Don’t be ‘underly financed’!
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Stan Prokop
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