In order to take advantage of the Canada Revenue Agency’s (CRA’s) SR&ED tax credit incentives the first thing you must do is determine if you are performing qualified SR&ED work. But how do you know if you’re doing qualified work? You must ask yourself if you have performed a technological advancement.
The CRA has recently consolidated its policies and created a SR&ED glossary. The glossary states:
Scientific or technological advancement is the generation of information or the discovery of knowledge that advances the understanding of scientific relations or technology. This definition encompasses the definition of scientific advancement, advancement of scientific knowledge and technological advancement. The only difference is that scientific advancement and advancement of scientific knowledge relate to science whereas technological advancement relates to technology.
But what does this actually mean? The definition provided is very skewed towards scientific advancement and the definition of technological advancement is almost lost. However, if we remove the words relating to scientific advancement and the rest of the unnecessary words this is what we get:
Technological advancement is the generation of information or the discovery of knowledge that advances the understanding of technology.
Or even more simply, a technological advancement advances the understanding of technology. Which begs the question then, what is technology?
What is technology?
Technology has a very broad definition in the SR&ED glossary:
Technology is the practical application of scientific knowledge and principles. While technology can be represented in physical form (patents, procedures, design documents, manuals, etc.), it is not a physical entity. It is the knowledge of how scientifically determined facts and principles are embodied in the material, device, product, or process.
So then a technological advancement advances the understanding of a practical application of scientific knowledge and principles… or a technological advancement advances the understanding of the knowledge of how scientifically determined facts and principles are embodied in the material, device, product or process…
Who wouldn’t be confused? Unfortunately, the CRA in it’s attempt to embody everything has made the definition even harder to understand. Based on the two definitions above we give the following examples.
An example of a practical application of scientific knowledge is the development of a video game using intelligent algorithms developed by computing scientists. A technological advancement could be an advancement of the understanding of those algorithms. An advancement of the understanding could be extending the capabilities of those algorithms, or could be understanding that the capabilities cannot be extended due to previously unknown limitations.
An example of how scientifically determined facts and principles embodied in a material is the development of an extra strong fabric based on the principles of nanotechnology. A technological advancement could be the advancement of the understanding of the nanotechnology used to develop the materials. A technological advancement could be the development of understanding of how certain materials bond when combined using different techniques.
So what exactly is a technological advancement?
In its simplest form a technological advancement is the following:
A technological advancement is an attempt at extending or further understanding the underlying science used to develop current materials, devices, products or processes.
Thus the importance of understanding the underlying science used to develop the materials, devices, products and processes that you may be attempting to advance. This is considered the current state of the art and will be discussed in a future posting.