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Tax incentives continue to drive innovation in agriculture

Date: August 30, 2022

Canadians up and down the country are really starting to feel the pinch from the rising cost of living, and agricultural producers are under pressure to ensure the price of goods remains reasonable.

At the same time, they’ve found themselves facing higher production costs and have needed to adapt their processes to meet demand, including efforts to reduce their carbon footprint.

In order to counteract this, what we are seeing is that innovation in agriculture is booming, as farmers and growers shift to more efficient farming practices.

Canada is a global leader in agricultural innovation and the Government is keen to keep it that way. Earlier this year, it announced that it was investing $860,000 in six small businesses to advance automation and robotic technologies in a bid to help solve the challenges of productivity and labour shortages.

The Scientific Research & Experimental Development (SR&ED) tax credit program remains the main incentive for all agricultural businesses but, as we speak to our clients, we are finding that businesses in this sector are misunderstanding exactly what qualifies. If you are unsure of what SR&ED is exactly, you can find a helpful guide here.

Innovation worthy of SR&ED?

We’ve seen big rises in the amount of qualifying R&D in agriculture, spanning irrigation, planting methodology, equipment modification as well as pest and bug control.

Within the grape growing sector, we’ve seen successful claims centred on pruning strategies and post-traumatic plant rehabilitation. This kind of work can apply to other types of crops too.

One client wanted to overcome splitting in grapevines. During cold snaps, vines can split when freezing conditions cause the sap within them to expand. In the past, growers have dealt with this problem by removing the vines and starting again with new planting. However, it has now been demonstrated that you can cut them back and restart these vines — ultimately ending up with plants that are more productive than new vines would have been.

Our client went to great lengths to discover whether removing the affected portion of the vine would result in either die back further down the plant or a decline in productivity in the rest of the vine. They also developed tailored watering profiles for the damaged vines, which differed from those of new vines in the same location.

Other projects qualifying for SR&ED within agriculture have included:

● Research to discover what time the soil should be aerated during the spring to remove as many harmful larvae as possible
● Identifying whether crops are net positive when it comes to feeding more nutrients into the soil than they remove, due to their die back
● Measuring the effect of oxygen exposure on fermentation and shelf life of a product

How much can these tax credits be worth?

There are a few factors that govern how much a successful claim is worth and it all depends on the structure of your business, as well as the Province you are based in. Our specialist SR&ED consultants will spell this out for you and confirm your provincial rate.

The claims we’ve processed for agricultural clients have been very successful, with the average refundable benefit to corporations being in the tens of thousands of dollars.

Most expenses linked to the R&D itself will attract tax incentives and we are lucky in Canada that SR&ED is one of the most generous incentive programs in the world.

For more information about the tax incentives available, you can reach Richard Hoy at Richard.Hoy@catax.com.

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