The Canadian Advanced Technology Alliance (CATA) says the federal government confirmed late last week that it has restarted the Scientific Research and Experimental Development (SR&ED) funding program in order to mitigate some of the economic strain facing Canadian businesses during COVID-19.
In an open letter to Justin Trudeau last week, CATA proposed a solution to rapidly assist some 12,000 Canadian businesses that conduct research and development through the federal Scientific Research and Experimental Development (SR&ED) funding program. The solution proposed is two-fold: First, accelerate the release of the backlog of $200 million in current SR&ED applications. Second, allocate a *Resilience and Rebound* fund of CA$3.6 billion to provide zero-interest loans (with forgivable portions) for companies that have proven track records. Using tax data from the SR&ED program means firms are pre-qualified and the fund would be administered through Innovation, Science and Economic Development Canada.
If no action is taken action now, the Canadian technology sector infrastructure built up over decades risks being crippled as creative small and medium-sized enterprises (SMEs) of the country disappear,
said Paul LaBarge, chairman of CATA and a founding partner of LaBarge Weinstein LLP, in the open letter from April 7.
“We need our most innovative tech companies to lead a rebound when we emerge from this COVID-19 emergency,” LaBarge said in a statement last week.
In an email statement sent to the publication April 15, the Canada Revenue Agency (CRA) confirmed that the SR&ED program has resumed.
“The resumption of the service provided by the SR&ED Program has been addressed within the CRA’s Business Continuity Plan, and will proceed accordingly in order to ensure that Canadian businesses receive the support that they need during this challenging time and that innovation is fully supported when it is most needed,” CRA noted. “As a result of this, the value of claims for refundable credits assigned to the SR&ED Program’s Review teams, which was $195.2 million on March 30, had decreased to $181.8 million by April 7 and should continue to decrease as the implementation of the CRA’s Business Continuity Plan proceeds.”
The agency also told the publication that each claim received by the SR&ED Program will be examined for a series of risk factors, but it expects far fewer audits and reviews will be performed than during any typical year. It said that the program is currently analyzing options to address more complex claims on an expedited basis and it will be in a position to implement measures in order to do so once operations have fully resumed.
“This is very good news. We understand CRA is remaining accountable to taxpayers and demonstrating flexibility in extraordinary times. They indicated to us they were very concerned about their SR&ED clients. We remain in close contact with them to help monitor the situation forward,” Suzanne Grant, the chief executive officer of CATA, wrote in an email.
In an emailed statement on April 13, CATA said the federal government confirmed late last week that it has restarted the (SR&ED) funding program. It continues to work on its second goal with federal ministries, noted CATA. IT Business Canada reached out to the Ministry of Innovation, Science and Economic Development to confirm the announcement. The ministry was not immediately available for comment.
One of the biggest concerns, according to Grant, is that these tech firms are not going to be able to access the relief that’s being handed out.
“On the part of technology, they’re particularly concerned because historically they haven’t been supported by banks because of the issue of intellectual property not being valued the same way bricks and mortar would be okay,” said Grant.
CATA says it wants to make sure that the country doesn’t lose hundreds of billions in past investments for research that developed intellectual property, as well as protect 85,000 jobs.
“Some companies are pivoting and doing okay in this economy if they’re in health or they’re in some parts of IT, if they’re helping companies’ remote cybersecurity needs…these things are doing okay, and then there are others where the clients have to stop payments, and then we also hear incidences where the company is well funded, but the funding from the venture capitalists have frozen as well,” Grant explained. “The payments have frozen even though there’s an agreement. So there is an abrupt halt to cash. I think the government’s initiatives are welcome and at the same time, they’re not timely enough for some companies. So I’m speaking with the Prime Minister’s Office and they said they were surprised to find that out.
“I want to say that everybody’s helpful, I think what’s important is to be able to articulate how a technology company has very unique criteria in the way that it operates. It’s very important that that’s understood so that the requirements can be absorbed.”
Grant said that she has been hearing some concerns on the topic of loans. When it comes to wage subsidies, everybody’s clear, but firms are worried that if the relief doesn’t come fast enough, the companies will still be forced to close.
“The world is very chaotic right now and the initiatives that the government is putting through are applauded. At the same time, we don’t want to lose some of our critical strategic assets, the investment in innovation,” she said. “Tech companies really need to be supported because they can lead us out and get our economy going at the end of COVID. But they need to be supported for the next 12 months at least.”