I was hoping for SR&ED to be completely axed. It's a huge monstrosity of paperwork, to the point that small businesses pay 30% of their tax credits to consultants who fill out the forms for them and large businesses hire teams of people for the sole purpose of tracking and classifying SR&ED expenses so that the tax credits can be claimed. I suspect that Tarsnap is eligible for some SR&ED credits, but it's simply not worth the time and headaches it would cost me to claim them.

If Canada wants to encourage innovation, they should set up a system which rewards people for doing new and innovative things, not a system which rewards people for being good at filling out forms.

I've filed SR&ED claims for multiple years for a successful startup. It was a) incredibly valuable and b) incredibly easy.

That said, I do know there are plenty of zombie companies that filed SR&ED claims with a bunch of handwaving and hogwash in it. In fact, it was recommended to me to not make any project sound like it's finished: that way, you can file again next year.

But if you waste 30% of your credit on consultants, you're the one being an idiot, not the government.

I've successfully written SR&ED applications myself for businesses certainly less deserving than Tarsnap. We decided the consultants were too expensive and gave it a shot ourselves. One solid week of work for one guy at a company of 10 people netted $30,000, definitely worth the time. All you need is a decent record of work done (I used both github commit log and a bug tracker.)

Unfortunately I expect you'll never get money from a bureaucrat without a little paperwork. Still, you're missing out if you don't even try.

Talk to Ernst & Young. They will help startups file for SR&ED for a flat fee of $1-3k. Takes a few hours to draft the document with their help. It is not as hard as it sounds.

While it is a big headache to trac, document work and formulate and application, it is most definitely worth it. I've been part of a team that has claimed small sr&ed pieces of work and managed to get back a substantial credit. I agree that there should be a more stringent vetting of applications as this is our tax payer money we're talking about.

From what I've heard, they're getting rid of tax credits and moving more to an RFP or grant-based system.

From skimming the news it seems like it's cut significantly.

>The changes include a cut in 2014 to 15 per cent from 20 per in the tax credit rate and a restriction on which expenditures count toward the credit. For example, capital expenditures – buildings, equipment and product prototypes – will no longer be eligible. The amount of eligible overhead expenses and subcontracted R&D will also be reduced.

http://www.theglobeandmail.com/report-on-business/economy/gr...

Bad news for Canada's tech innovators.