Taking a grant and a tax credit in the same year

"We got IRAP this year, so the tax credit sits on top of that, right?"

You can have both. Companies do it every year and they should. There is one rule underneath it that surprises people, and once you know it the rest makes sense.

The rule

If government money paid for part of a cost, the tax credit is worked out on the part it did not pay.

Say a contribution covers some of the salaries on a project, and those salaries were going into your claim. The claim now gets calculated on what is left after the contribution comes off. On a $150,000 contribution, the federal credit comes down by roughly $52,500.

That is not a reason to turn the grant down. Around $97,500 of it still stays with you. The point is only that it is not $150,000 on top of a full claim.

Three things follow.

Timing. What matters is when you know the money is coming, not when it reaches the bank. If you have an approval letter before you file, that contribution belongs to that year, even if the cash arrives eight months later.
Disclosure. Every grant application asks you to list your other funding. Answer it fully every time, including applications that have not been decided. The agreement you sign sets a ceiling on how much total government money one project can carry, and that gets checked at the end.
Records. Keep one set. If the same employee's time is going into a grant claim and into your tax credit, those hours get divided between the two, not counted once for each. It goes wrong when the grant file sits with one person, the timesheets with another, and the tax credit with someone outside the company.

Then there is the part that makes money.

Most projects have some work that belongs in a tax credit and some that does not. Testing and development on one side, equipment and setup on the other. Where the facts allow it, putting the contribution against the part that was never going into the claim protects the credit on the part that was. That is ordinary planning, and it is only available while the budget is still being written.

Which is the whole reason to look at this before the budget is set rather than after.

A grant in play and a claim coming

If both are on the table this year, the interaction is worth half an hour before the budget is fixed. That is when the decisions are still available.

Book a meeting See what stacking adds up to

Briefing

Who should be writing your SR&ED claim

Guide

NRC IRAP, in full

Guide

Global Innovation Clusters, in full

Reference

Every programme, in detail

General information current at the date of writing, not advice on a specific claim, application or agreement. Program rules and administrative practice change; we confirm the current position for every file.