Technology is always changing, and it’s easy to forget that these advances impact every industry. When we think about SR&ED tax credits, tech and manufacturing companies usually come to mind first, which makes sense since about 80% of claims come from these sectors. However, many other industries are also benefiting from SR&ED credits, even those you might not expect.
Fields like software development, AI, 3D printing, and machine learning are transforming industries across the board. At the same time, companies are increasingly focused on developing sustainable operations, products, and services to tackle climate change. As businesses work to integrate new technologies, many find that off-the-shelf solutions don’t meet their needs, leading them to develop their own innovations—work that often qualifies for SR&ED tax credits.
This is why it’s important for businesses and accountants alike to consider whether SR&ED credits can provide a valuable financial boost. Canada’s SR&ED program is one of the most generous in the world, especially for Canadian-controlled private companies (CCPCs) that meet certain financial thresholds. When combined with provincial R&D tax credits, these companies can receive over 40% of their eligible costs back.
For example, a CCPC with $100,000 in SR&ED expenses could receive between $40,000 and $65,000 in refundable tax credits. It’s worth exploring SR&ED tax credits if your business is working on developing its own technology.
Here are some examples of industries that may not typically claim SR&ED but are increasingly engaging in innovative R&D projects that likely qualify:
1. Retail and Fashion
While traditionally seen as creative or consumer-driven, many fashion and retail companies conduct significant R&D. This includes developing new fabrics (e.g., sustainable or smart textiles), creating innovative retail technologies (like virtual fitting rooms or augmented reality shopping), and improving supply chain logistics using AI and data analytics.
2. Hospitality and Tourism
Hotels, resorts, and travel companies conduct R&D to improve guest experiences, optimize operations, and reduce their environmental footprints. For example, hospitality chains invest in R&D for smart room technology, energy-efficient systems, and data-driven customer personalization tools.
3. Food and Beverage
Beyond product development (new recipes, flavors, or healthier options), R&D in this sector also focuses on packaging innovation (e.g., sustainability and preservation), food production methods (like lab-grown meat), and AI-based tools to improve supply chain efficiency and food safety.
4. Insurance
The insurance industry increasingly uses R&D to develop better risk models, predictive analytics, and customer service technologies like AI-driven chatbots. R&D also includes blockchain research for smart contracts and fraud prevention, as well as machine learning for faster claims assessment.
5. Construction and Real Estate
Construction companies, once considered low-tech, now invest heavily in R&D. They explore building automation, sustainable construction materials, and advanced safety technologies, such as drones for site inspections and 3D-printed houses.
6. Agriculture
Agriculture, often seen as a traditional industry, now engages in significant R&D, including precision farming, genetic engineering, drone technology for crop monitoring, and developing climate-resistant crops or eco-friendly pesticides.
7. Funeral and Deathcare Industry
Even the funeral industry has R&D activities, focusing on eco-friendly burial practices (e.g., biodegradable coffins or alkaline hydrolysis). There’s also innovation in grief technology, such as AI-driven memorial services and virtual remembrance spaces.
8. Professional Services (Legal, Accounting)
Even in law and accounting, R&D is growing. Law firms invest in legal tech, such as AI for document review and predictive analytics for case outcomes. Similarly, accounting firms research automation technologies and data analytics tools to improve auditing and compliance.
9. Sports and Athletics
R&D in sports isn’t limited to equipment. It also covers athlete performance optimization, wearable technologies to track biometric data, and innovations in fan engagement, such as virtual reality or enhanced broadcasting techniques.
10. Entertainment
The entertainment industry, particularly film, music, and gaming, invests in R&D to explore cutting-edge technologies. This includes virtual and augmented reality, AI-generated content, new streaming technologies, and innovations in special effects (like deepfake technology for movies).
Conclusion
These industries, while not traditionally associated with intensive R&D, engage in continuous innovation to stay competitive and meet evolving market demands.
If you need assistance or would like to discuss whether your company can benefit from SR&ED tax credits, please don’t hesitate to contact us.