SR&ED Eligibility Criteria and Possible Projects in the Medical Cannabis Industry

March 26, 2018

The Scientific Research and Experimental Development program (SR&ED) was established to support R&D and innovation within Canada. $3 to $5 billion dollars is dedicated to the program annually by the government. Any Canadian company acquiring new knowledge (which is not available in the public domain) by the systematic investigation is eligible for up to 65% refund for its R&D expenses, including salaries, overhead, subcontractors and consumed materials.

To be eligible the project has to include the following characteristics:

1. Technological Uncertainty – when based on previous experience and open access information the company cannot overcome a technological challenge.
2. Systematic Investigation – rounds of experimentation, in which ideas (hypotheses) are tested.
3. Technological Advancement – knowledge base growth, learning process.
4. A detailed record of all the above with connection to the claimed amount.

In respect to the Medical Cannabis Industry, ABGi Canada currently has several clients to which we successfully claim more than $500K annually combined.

Below are examples of eligible R&D activities:

1. Development of growing methods to increase yields and/or potency (nutrients composition and delivery methods, lighting, etc.).
2. Development of more effective cannabinoids isolation/purification methods (e.g., extraction, distillation, winterization, etc.).
3. Development of more precise analytical methods for identification/quantification of cannabinoids and other compounds in cannabis (e.g., terpenes, pesticides, etc.).
4. Isolation of analytical standards with higher purity.
5. Any challenging development of products with the cannabinoids (oils, creams, food, pharmaceutical products, etc.).

The projects do not necessarily have to be innovative – it can involve even routine activities, only if these projects involve measurements of any characteristics, learning and/or modification of standard procedures.

Below are several ways ABGi Canada increases claims:

1. Meetings with the R&D personnel is conducted on a quarterly basis to discuss the projects and review/collect the documentation. This approach has the following benefits:
   • There might be work that normally does not qualify for SR&ED that can be directed to become eligible with some additional steps. We can identify such projects when they are ongoing and increase the claim.
   • There is no burden on the technical team close to the claim submission. No need to remember the work that was done more than a year ago and to look for supporting documents.
2. In addition to large and long development projects, which can be called “low hanging fruit”, we collect smaller projects under common “technological roof”.
3. We review your “routine” production in order to find varying parameters. If correlations can be found between these parameters and the product properties – routine production or its part becomes an SR&ED project.
4. In addition to SR&ED, we assist with applications for grants and make sure that there is no conflict between the funding from different sources.

ABGi Canada can assist you in obtaining tax credits for research and development activities. Whether your work involves basic research, applied research, or experimental development, ABGi Canada can take the uncertainty out of the filing process and get you the credit you deserve for your innovation.

For further information on the Medical Cannabis Industry, please contact us today.