Alberta Cancels its SRED Program

I’ve been away and not bothering much with this blog. While I was away, the Alberta Budget was introduced. It contains big hits for technology developers.  

The Interactive Digital Media Tax Credit program is being eliminated.  It had barely been enacted. 

The Alberta SRED credit will be eliminated effective beginning next year. In other words, only expenses incurred prior to January 1, 2020 will be eligible for the Alberta SRED program. The Federal SRED program will still be available to Alberta companies, but the change means a significant reduction in benefits to Alberta companies doing SRED. 

The Investor Tax Credit program is terminated now. 

I have long said that the Alberta government has been short-sighted for decades: the season of petro wealth would end, as all seasons do. Alberta has needed to diversify its economy. In my opinion, what is driving the 21^st century economy of the developed world is technology. Alberta needs to be a part of it. Abandoning tax credits that encourage tech development in Alberta seems a step in the wrong direction. Alberta has to compete with BC in the creation of a business and social environment that is friendly to tech developers, particularly when more people prefer the climate and landscapes of BC over those of Alberta than the other way around. 

Maybe Alberta will find other ways to enhance its attractiveness to tech development companies. The current government seems to think that lowering the corporation income tax rate will do the job, but lower income tax rates offer no appeal to companies that have yet to see their first dime of profit, and many tech developers are such companies.

2019 Budget

The 2019 Federal Budget, 464 pages long, contains one significant change to SRED rules. The erosion of the annual expenditure limit on account of the previous year’s taxable income exceeding $500k will cease. The change applies to taxation years ending now and later.

Distinguishing a Technical Problem from a Technological Problem

This photo depicts a technical problem. A technological problem might be how to phase shift someone using the urinal so that the door could pass through him. 

Building Your SR&ED Claim

I have been through many SRED reviews with CRA over the years, and I have observed what makes a claim strong and what makes it weak. It is MUCH better to keep SRED in mind right from the early stages of a project and to document things accordingly.

Here is what CRA wants to see:

1. They want records that show that at the outset of a project you have set out the technological objectives. 


2. They want to see how it was that achieving these objectives would solve a technological or scientific uncertainty.

3. They want to see that there was no way of resolving that uncertainty using only the pre-existing knowledge (what you know at the outset of the project plus what was available within the public domain).

4. They want to know what you did to try to find a solution within standard practices. You can't very well say that knowledge existing at the outset of the project couldn't do what you needed to do if you haven't looked for it.


5. They want to see that before you did the work, you determined how you would measure how well the objectives (see1 above) were being achieved.

6. They want to see that at an early stage you had a plan as to what methods and analyses you would use to resolve the technological or scientific uncertainties.

7. They want to see how you followed your plan, and they want to see that you have records that prove it.


8. They want to see what were the results of your experiments and analyses. This means some notations as to what you found and what conclusions you drew and why you did so. Sometimes your experiments and analyses may involve forming a new hypothesis. CRA wants to see that recorded also.


Sometimes new uncertainties will arise during the course of trying to resolve previous ones. Then records of these and how your tackle them ought to be kept.


It's important to have records that are produced as the project progresses. These records should be usable as evidence of the above items 1 to 8, but also the records should establish how much was spent doing the work. Time sheets should be kept by each project worker, showing what they did each day and how it relates to the SRED. I suggest that each technological uncertainty is given a number (such as 1, 2, 3...) and each time sheet entry is coded with the number of the uncertainty to which that work relates.


Do these things, and the likelihood of a successful claim is  substantially increased.

Technological vs. Technical Uncertainties

One of the most frequent faults CRA’s SR&ED reviewers find in a claim during an on-site review is that the project contained technical uncertainties rather than technological uncertainties. The difference has to do with whether the uncertainty is an obstacle that can be resolved by technology (knowledge) that is at the taxpayer’s disposal. I have frequently been in reviews where the RTA has insisted that the project’s advancement was simply achieved by merging together already existing technologies, not acknowledging that the integration of technologies that had been used in other contexts involved uncertainty over how to make them work successfully together in the current project. Yet, often systematic uncertainty arises, and it is not clear how to get technological components to do what the claimant needs them to do when they are interacting together, with the result that systematic investigation of the problem is used to develop experiments to resolve the uncertainties. I don’t doubt that according to the law, SR&ED is being done in such cases, but it does not always seem easy for an RTA to get it.