“But that’s just what we do…” says a director at an architecture practice I am working with. “True, but that doesn’t mean it doesn’t qualify for SR&ED”, I reply.
The architecture sector is hugely overlooked when it comes to claiming SR&ED expenditure credits. Architects today are creating some of the most stunning, innovative, and complex buildings within city centres to remote areas, and everywhere in between. To create these stunning, innovative, and complex buildings, architects must be pushing the bounds of what is possible– or else we’d all be sitting in standard square buildings.
Today, everyone wants bigger, better, stronger and more ecologically friendly homes. As I am sure architects will attest to, clients come up with crazy and ‘out there’ design ideas, and it’s up to them to bring these…unique…ideas to life. In some cases, the industry-standard way of approaching these designs just isn’t appropriate, or a standard approach may not even exist yet. Therefore, architects and their teams must come up with different ways to get the project over the line.
In my experience, there is an unfortunate misunderstanding that claiming SR&ED expenditure credits is reserved solely for the laboratories and doesn’t apply to them. In looking at the CRA tax law and rules, I can understand why this is the perception. However, when you sit down and piece together the tax guidance and see how it can be applied in a practical sense, you can see the depth and breadth of its application. Essentially, the legislation boils down to two items:
• How have you advanced the current state of the art?
• What technological challenges did you have to overcome to complete the project?
These advancements can be major – like achieving a high BREEAM rating through the development of new renewable technologies or can be more modest, such as incorporating new building materials, new foundational techniques or utilizing/re-purposing existing technologies in a manner that it was not designed to do.
Perhaps one of the most interesting cases I’ve stumbled upon is one of my clients was incorporating PassivHaus technologies into their new home build. The goal was to make the house as efficient as possible, in terms of thermal, acoustic, air tightness, and structural performance. Every single aspect of the home build was considered, down to experimentation with many different materials to ensure that the home performs optimally. This required the company to experiment with materials that are not traditionally used in this application and, in some cases, designing their own materials. What CRA is looking for is a technological gap in knowledge – is the existing technology limiting in some way? Does the technology not exist? How did you overcome these challenges to get the project over the line?
Recent research and statistics from the CRA note that most architecture practices are not claiming. But what do the practices that claim the SR&ED expenditure credit claim relief on?
• Salary/Payroll costs of staff involved
• Canadian contractors
• Wasted materials
CRA wants to reward Canadian companies that are innovating. With the challenges COVID has put all businesses through, the CRA want to see companies stay afloat and SR&ED expenditure credits are a sure-fire way to fund innovation. I have had the privilege of working with companies struggling to pay their employees or struggling to find the money to take a project to tender and through this incentive, Catax Canada has been able to unlock money to be further invested into the practice. By doing so, these practices have greater flexibility – some may hire other staff, or some take on more complex projects they otherwise wouldn’t be able to. At the end of the day, this incentive is a way to ensure that architects have the funds to continue innovating to push Canada to the forefront of best practices in architecture worldwide.
So many architects are missing out on this highly beneficial relief – please don’t be one of them.