SRED Facts

Information about Canada's SR&ED Tax Credit Program

4 Ways to Write a Solid Technological Advancement for SRED

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The technological advancement is a critical component of your SR&ED technical report. You state what technological advancement(s) you were attempting to achieve on line 240 of the T661 SR&ED form.

In this post, we’ll look at the factors that make up a strong technological advancement statement that conforms to the SR&ED program’s eligibility criteria and then look at an example.

Keep in mind this isn’t a guide to guarantee that your project will pass. That’s dependent on the actual R&D you’re doing as well as the CRA’s judgement. The goal here is to help you avoid explaining aspects of your technology that may be great for your customers and your business, but not eligible for SR&ED.

1. Focus on the technology behind your product.
While it’s alright to mention your product and some business features in the introductory paragraph to give your reader context, it’s important not to focus on the features when you state what your planned technological advancement is. Most features are solutions to business problems, not technological problems.
2. What problem are you trying to solve?
Speaking of problems, if you’re having trouble isolating and describing the technology you’ve created, look at the problems you had to solve during development. Were there any problems that required you to experiment with different approaches? Was the solution not just applying standard practice to solve it?
3. Compare what the industry’s standard practice is and what limitations there are with it.
This will help the reader understand what the existing industry knowledge base is and provide them with a comparison to measure the advancement you’ve made. If you show you’re advancing the state of technology not only for yourself, but for your industry, that’s a good thing (for everyone).
4. State how you will measure success.
Include any concrete metrics (estimates are acceptable) such as time (e.g., we sought to achieve page rendering in 25 ms), percentages (e.g., performance was improved by 30%), or any other units of measurement (e.g., we reduced total application size by 500MB). This type of information strengthens the claim and demonstrates that a “systematic approach” was followed as you measured progress through each experimental iteration. This also allows you to show failures (assuming you had some). You’ll have data that shows the outcome was uncertain because some of the time you didn’t get the result you wanted.

Let’s see how we can apply these tips to improve a poorly stated technological advancement. CAVEAT: we’re assuming here that the 2nd statement is what you actually did, and the 1st statement just doesn’t properly capture it. We aren’t suggesting you make it up.

First, here’s the bad example:

We developed a mobile game called Car Racing that allows users to race against each other on different phones.

Now, here’s a better way to describe your work:

We sought a technological advancement that allows bi-directional communications in real-time ( < 1 second latency) on 3G networks by developing ways to minimize memory usage on the limited 256 MB memory available on mobile devices. The current practice is to compress graphics but the available tools add metadata to graphics thereby causing our high resolution graphics to be too large and memory intensive.

Again, we’re not saying the improved description is perfect. But it does focus on the technological advancement at play in your application, not the features. If your project descriptions don’t sound like your product, that’s ok. Your product is trying to solve a business problem. Your SRED claim is trying to find out which aspects of your work are eligible for tax credits.

Learning how to craft a technological advancement statement correctly will demonstrate to your reader – the auditor – that you understand the SR&ED program’s criteria and that you are only claiming what is eligible. If you try to keep these 4 tips in mind as you formulate your technological advancement statement, you’ll strengthen your claim by focusing on the eligible components of your project.

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