How businesses can unlock more value from their innovations
Drawing a close on 2020, businesses across Canada will be counting the cost of the pandemic and all the obstacles it has thrown in their path.
Many companies will have put hiring on hold, laid off staff, postponed new products and put innovation on ice.
Others will have done the opposite, and used the pandemic as an opportunity to innovate more than usual.
Whatever the case, as the world emerges from the crisis next year, many business leaders won’t realise they can make faster progress than they think by taking advantage of an often overlooked government incentive for research & development to generate more value from work they have already done.
In Canada, one of the most important tax incentives is the Scientific Research & Experimental Development (SR&ED) program. We’ve seen claims for this type of incentive more than double in the past year as firms redouble efforts to ensure they’re claiming all the tax benefits owed to them. That is typical in times of economic stress.
In the past SR&ED has been widely misunderstood and businesses continue to underclaim. The tragedy for companies across Canada is that, in the wake of the pandemic, many will go out of business without realizing they were owed tens, maybe hundreds, of thousands of dollars.
How can businesses in Canada benefit from this boost in income?
SR&ED tax credits allow companies to claim back 35% of qualifying R&D expenditures, up to a maximum of $3 million in each tax year, and 15 percent for expenses above that amount. They will receive a cash payment or the claim will be offset against outstanding taxes.
SR&ED claims are usually split in two because there’s a federal and a provincial component. The 35% rate applies to the federal investment tax credit (ITC) and the local rate varies between provinces. Generally speaking though, SR&ED will typically return about 41.5% of a qualifying project’s R&D costs to a business, so it can be extremely beneficial.
Seasoned tax advisers with experience of SR&ED claims will know what qualifies. Essentially though, there are three simple tests that must be met for innovation to qualify for these incentives.
The work must:
● further technical knowledge or create advancement in their industry;
● overcome scientific or technological uncertainties; and
● follow a methodical approach consistent with systematic investigation.
Contractor costs qualify too, so companies using outside firms within Canada to carry out eligible work can still claim.
Examples of qualifying projects include:
- improving thermal capabilities or airtightness in the construction industry
- creating new navigation tools in the avionics sector
- and writing new automation software for the manufacturing industry
How can Canadian businesses make a claim?
Businesses can claim SR&ED up to eighteen months after the tax year in which the work took place and it costs firms nothing to establish whether they can claim as most consultancies charge contingent fees. This is where businesses pay a percentage of the value of the claim once successful. The SR&ED regime for SMEs in Canada has actually improved recently, so it’s just become even more generous.
Whatever the economic challenges still to come during this pandemic, making the most of the SR&ED incentive could make all the difference.
Check Point: Securing the future of enterprise IT
Cybersecurity solutions provider Check Point was founded in 1993 with a mission to secure ‘everything,’ and that includes the cloud. Conscious that nothing remains static in the digital world, the company prides itself on an ability to integrate new technology with its solutions. Across almost three decades in operation, Check Point, with its team of over 3,500 experts, has become adept at protecting networks, endpoints, mobile, IoT, and cloud.
“The pandemic has been somewhat of an accelerator in the evolution of cyber risk,” explains Erez Yarkoni, Global VP for Cloud Business. “We had remote workers and cloud adoption a long time beforehand, but now the volume and surface area is far greater.” Formerly a CIO for several big-name telcos before joining Check Point in 2019, Yarkoni considers the cloud to be “part of [his] heritage” and one of modern IT’s most valuable tools.
Check Point has three important ‘product families’, Quantum, CloudGuard, and Harmony, with each one providing another layer of holistic IT protection:
- Quantum: secures enterprise networks from sophisticated cyber attacks
- CloudGuard: acts as a scalable and unified cloud-native security platform for the protection of any cloud
- Harmony: protects remote users and devices from cyber threats that might compromise organisational data
However, more than just providing security, Yarkoni emphasises the need for software to be proactive and minimise the possibility of threats in the first instance. This is something Check Point assuredly delivers, “the industry recognises that preventing, not just detecting, is crucial. Check Point has one platform that gives customers the end-to-end cover they need; they don't have to go anywhere else. That level of threat prevention capability is core to our DNA and across all three product lines.”
In many ways, Check Point’s solutions’ capabilities have actually converged to meet the exact working requirements of contemporary enterprise IT. As more companies embark on their own digital transformation journeys in the wake of COVID-19, the inevitability of unforeseen threats increases, which also makes forming security-based partnerships essential. Healthcare of Ontario Pension Plan (HOOPP) sought out Check Point for this very reason when it was in the process of selecting Microsoft Azure as its cloud provider. “Let's be clear: Azure is a secure cloud, but when you operate in a cloud you need several layers of security and governance to prevent mistakes from becoming risks,” Yarkoni clarifies.
The partnership is a distinctly three-way split, with each bringing its own core expertise and competencies. More than that, Check Point, HOOPP and Microsoft are all invested in deepening their understanding of each other at an engineering and developmental level. “Both of our organisations (Check Point and Microsoft) are customer-obsessed: we look at the problem from the eyes of the customer and ask, ‘Are we creating value?’” That kind of focus is proving to be invaluable in the digital era, when the challenges and threats of tomorrow remain unpredictable. In this climate, only the best protected will survive and Check Point is standing by, ready to help.
“HOOPP is an amazing organisation,” concludes Yarkoni. “For us to be successful with a customer and be selected as a partner is actually a badge of honor. It says, ‘We passed a very intense and in-depth inspection by very smart people,’ and for me that’s the best thing about working with organisations like HOOPP.”