Case Study: No Claim, No Gain

Technology Tax Credits identifies additional research projects for an Alberta-based company specializing in hardware/software test and measurement solutions; the SR&ED refund is 8 times more than the company had claimed in previous years.


For several years, the internal staff at Advanced Measurements Inc. (AMI) compiled the company's annual Scientific Research and Experimental Development (SR&ED) claims to recoup research dollars. However, in 2004, they had about 10 engineering and manufacturing projects on the go, and there just wasn't enough time or resources to commit to the claim process. With their engineering and accounting staff tied up, AMI decided to outsource the SR&ED claim process to the experts at Technology Tax Credits.

AMI manufactures automated controls and information systems for the oil and gas service sector. Founded in 1990, AMI has offices in Calgary and Edmonton and employs about 50 people. The company's commercial technology includes real-time control systems for mobile oilfield service rigs and fracturing vehicles, field monitoring units for low production oil and gas wells, and fuel cell test stations.

The Process

At an initial scoping meeting with AMI's technical staff, Technology Tax Credits' Vice President of Finance, Bryan Korolischuk (CMA, P.Geoph), discovered that the company was grossly under-claiming their research and development expenses. "Generally, companies who do their own SR&ED claims often end up under-claiming eligible expenses," explains Bryan, "In some cases, they under-claim thinking that it will protect them from a financial review, which is a false assumption. In most cases - like the situation at AMI - they leave out research projects or eligible costs simply because they don't realize that they qualify for the tax credits."

Bryan knows all about SR&ED eligibility requirements - as a former Financial Auditor and Science Reviewer for the Canadian government's SR&ED program, he has reviewed hundreds of claims for 'the other side' and knows what qualifies as research and what doesn't. Bryan's partner Wayne Powell (B.Sc. Comp. Sci.), President of Technology Tax Credits, is also a former reviewer of the SR&ED program. Having worked as an independent consulting expert to the Canada Revenue Agency, he reviewed many large and controversial claims on a regional, national and appeals level. Together - along with their team of specialized technical consultants - Bryan and Wayne have been assembling rock-solid SR&ED claims for their clients since 2003.

During that same site visit at AMI, Bryan and Wayne probed further to discover that AMI had a subsidiary company in Ontario. The subsidiary was doing research to develop test stations for automotive manufacturers. These stations tested components such as brakes, clutches, cooling systems, oil pumps, transmission pumps and cruise controls. AMI didn't realize that their Ontario projects qualified as eligible research, so they didn't include them in past SR&ED claims.

After a long-distance conference call with the Toronto office, Technology Tax Credits determined that the Ontario projects carried potential for an SR&ED claim. Bryan flew to Toronto the next week and not only compiled the necessary data for the current year's SR&ED claim, but was able to file a claim for the previous year as well.

Results & Impact

All in all, the SR&ED expenses compiled by Technology Tax Credits was eight times more than in the previous year's claim completed internally by AMI's staff. The Canada Revenue Agency approved the claim and paid the tax credit as filed without any financial review.

Over the years, Technology Tax Credits has watched AMI grow from being strictly a technical engineering services company to a product development company - a change that can carry uncertain financial risks. "It's interesting to watch companies evolve as their financial situations change," Wayne says, "If the government is giving you 50% of your R&D project costs back, you're essentially doing research with 50 cent dollars. For the CEO or CFO, this means that your company may be able to take on more risk and be more innovative when it comes to product development."

When the Canada Revenue Agency (CRA) conducted a financial review with AMI in 2005, both Bryan and Wayne fielded CRA's questions and provided expert technical assistance to the AMI staff. Says Wayne: "We know the SR&ED process inside and out, and we document the clients' research methods in detail. So we not only help the client to compile a strong claim, but we also provide knowledgeable backup to support their claim in the case of a technical or financial review." The review was successful and AMI received the research dollars they were entitled to.

According to Steve Conquergood, President of AMI, his main decision to hire Technology Tax Credits was based on the CRA background and expertise of the principals. After a number of years, AMI continued to use their SR&ED services, because Technology Tax Credits has a very efficient process for getting the claim prepared and there is excellent communication with the client and most importantly, the claims are successful. As for the refunds, AMI has reinvested the money back into the business to make it grow by using it to pay salaries and hire more staff and also keep advancing the technology. Since receiving its first tax credits, AMI evolved from a technical engineering services company to a product development company. Also, according to Steve, knowing that research dollars can be reimbursed via tax credits so that AMI is working with 50 cent dollars allowed AMI to take on more risks in product development. This was a tremendous advantage in bidding on projects as well as conducting internal research.