Richard Moore: Scientific Research and Experimental Development program Expert

This week, Stephen Ibaraki, I.S.P., DFNPA, CNP, has an exclusive interview with Richard Moore, Scientific Research & Experimental Development (SR&ED) program expert.

Discussion:

Q:  Richard, I know your schedule is extremely tight so thank you for agreeing to this interview.

A:  I’m ready.  Let’s begin. 

Q:  Can you detail your history and how you got into this area?

A:  Nine years ago, Revenue Canada made a one hour presentation to Okanagan College, after which I asked the Dean of Science sitting beside me if he understood what the presenter was trying to convey to us. As I suspected, he didn’t understand either.

The Revenue Canada employee could not concisely convey that Canadian Controlled Corporations in British Columbia receive cash equal to the sum of costs incurred to resolve technically-challenging issues:

• 69% of salaries;
• 42% of contract payments;
• 23% of test equipment (new, not used);
• Less 42% of NRC/IRAP grants or other government assistance.

So I offered my assistance to the presenters’ boss, Dr. Wayne Fong, a capable manager of about two dozen Science Consultants hired to get rid of a backlog of SR&ED claims. For four years I determined the eligibility of software SR&ED claims, which are the most contentious of all. 

My first client, PMC-Sierra, made millions by following my advice nearly five years ago. I’ve quarterbacked the entire SR&ED application process for 50 clients; they’ve received more than 125 SR&ED cheques.

Q:  What is the difference between NRC grants and SR&ED funding?

A:  SR&ED has no upper bound; $3 Billion annually; amounts are predictable; eligibility is established according to objective criteria.

NRC IRAP is limited to a few hundred million dollars annually, much of which is spent on about 265 Industrial Technology Advisors who subjectively assess you and other applicants. They typically earn salaries of about $75K, so only a small portion of the total budget reaches clients (in small amounts like a $15K grant = 50% of the labour cost of a $30K budget; yes it can grow.) 

All ITAs are hardworking, well-intentioned networkers. Access their knowledge and contacts.

NRC grants are subject to funding budgets that unexpectedly disappear! Some companies are suddenly left high and dry when NRC runs out of money, typically in the fall — followed by a push to advance funds when the federal government’s fiscal period ends in the Spring.

Both SR&ED and NRC are treated as income. Neither is repayable. 

Q:  Do you have an interesting story to tell?

A:  A client in the firewall business folded because its CTO procrastinated. They received a quarter of a million dollars through SR&ED too late — after the company closed its doors! Technologists sometimes can’t stop adding bells and whistles to obtain SR&ED money. Writing doesn’t come naturally to techies. They procrastinate when they don’t understand what to do. My templates distil SR&ED by sampling, filling in blanks in a timely manner. Proper information capture automates annual preparation of SR&ED Technical Submissions. Knowing what information to capture is critical. This is CRA’s perspective:  What’s difficult about the work this company performed?” and “What did they learn?”

Q:  Can you provide a case study of SR&ED funding?

A:  Typical scenarios are companies that have spent at least one-quarter millions dollars in their last two fiscal periods. Typically they receive SR&ED cheques for greater than $100K. Every year!

Q:  What are your objectives in the near and long term?

A:  To replicate myself, through protégés. I want to hire a young MBA with a technical background to replicate the process through which I take my clients. Simple, quick, and effective.

Q:  Do you have any advice to give to businesses?

A:  SR&ED is a source of always-critical financing for startups. Plain and simple. Use it!

Q:  What would be your recommended top URLs?

A:

• http://www.TechIncentives.ca/index.htm
• http://www.cra-arc.gc.ca/sred/

Q:  If you were doing this interview, what questions would you ask of someone in your position and what would be your answers?

Q1:  Why do I need a consultant?  I’ll do it myself!  I don’t need you.

A1:  My templates ensure that my clients have documentation ready to satisfy CRA, so they count on receiving their SR&ED cheques every year! Because I was a Science Consultant for 4 years to CRA, I understand what my former colleagues expect!  I fill holes in your SR&ED Technical Submissions BEFORE CRA sees them.  My system captures information simply, easily and effectively; only one hour per month is required of each technical person. Instead of spinning their wheels, get them focused on doing what they do best — delivering your products. Outsource SR&ED like you contract other services. Procrastination is probable, unless someone quarterbacks this effort. But you need to act in a timely fashion, because every day that goes by is another day that you won’t have your SR&ED cheque to use to build your business. Yet SR&ED will have a big impact on your company’s balance sheet!

I’ll prepare your SR&ED forms too, so you’ll save accounting fees! I’m the only person in Canada (that I am aware of) who is able to prepare both the technical and financial portions of SR&ED claims. This powerful combination ensures that my clients receive the maximum. Their claims include all SR&ED-eligible expenses. Because I work on a contingency basis, you know things will be taken care of properly.

Q2:  With your hectic schedule, what do you do for relaxation?

A2:  I play tennis and squash 3 times weekly. And fix up my new house in Point Grey.

Q:  It’s a blank slate, what added comments would you like to give to enterprise corporations and organizations?

A:  Pay attention to this deadline: SR&ED claims must be submitted to CRA within 18 months after every fiscal period. You might be lucky and be able to submit two SR&ED claims for TWO FISCAL YEARS, if your company’s fiscal year falls within this 18 months. 

You’ll receive more money by capturing information throughout the year. Technical people often are puzzled at the beginning of an assignment, when uncertainties prevail, but later tend to think, “Gee, that wasn’t so difficult after all”. Later, when they write up their SR&ED claims, they omit time spent solving problems. And you just lost some money! It’s critically important to document early, with the right perspective. For that, see my comment to the third question.

Q:  Thank you for sharing your valuable insights with us today.

A:  It’s nice to get the word out.