Canadian oil and gas companies that carry out innovative work can be eligible for a valuable government benefit that could reduce their tax burden, freeing up capital and improving cashflow.
If you are developing processes and tools to overcome technological challenges or experimenting to solve technical issues with the aim of improving the durability and consistency of oil and gas processes, then your company could be eligible for the Canada Revenue Agency’s (CRA) SR&ED program.
Which oil and gas research activities are eligible for SR&ED?
Energy companies carrying out basic research, applied research and experimental development in the oil and gas sector could have a basis for making a claim from the CRA’s SR&ED program. Whether your work involves reducing emissions or methane, experimental development of drilling technologies or carbon capture, there could be a tax credit waiting for you.
Note: prospecting, exploring and drilling for petroleum and natural gas do not count as research activities for the purposes of SR&ED.
Example projects
Here are some examples of oil and gas research projects that could be eligible for the SR&ED incentive.
Research into drilling optimization
An oil company uses iterative testing to reduce vibration and tool failure in deep offshore wells. This work in the upstream sector features testing and refinement, so it could potentially qualify for SR&ED.
Modelling a reservoir
A software company tests a novel reservoir simulation model to improve output predictions and, ultimately, improve recovery rates in an offshore oil field off Newfoundland and Labrador. The project aims to address geological uncertainties through reservoir engineering, which means it could qualify for SR&ED.
Reducing bottlenecks in processing facilities
A company tries an experimental redesign of a processing facility to avoid a known bottleneck. The process change involves an unknown outcome under real-world conditions, so it could be eligible for SR&ED.
Easier upgrades for bitumen
In Alberta, a company specializing in extraction from oil sands researches possible improvements to the process it uses to upgrade bitumen into synthetic crude. The major technical uncertainty means this work involves a lot of experimentation and the company tracked iterations, failures and improvements. So, the project could well qualify for SR&ED.
Canadian SR&ED’s oil and gas sector page can help you to explore eligibility criteria.
Ways for oil companies to optimize their SR&ED claim
Oil and gas companies keen to maximize the SR&ED refund should ensure they submit their tax return, which includes the SR&ED application, to CRA on time. The deadlines are strict, and it isn’t possible to get an extension. The CRA has a tool to help you work out your deadline.
It is much easier to make a claim from SR&ED with a project that has been designed with the claim process in mind. By getting an SR&ED consultant on board early, make small changes to documentation and research processes that will optimize your claim.
When the time comes to file your taxes, an SR&ED expert, like those at Canadian SR&ED, can prepare and submit your claim, reducing the risk of it being rejected. An R&D tax consultant can also deal with any CRA audits that might arise.
Common opportunities oil and gas companies miss
Projects in the energy category have historically made up a significant proportion of SR&ED applications to the CRA. But many SR&ED applicants in the oil and gas sector underclaim because they do not fully understand which activities are eligible for SR&ED. This is regrettable, as they miss out on money that rightfully is theirs.
Outsourcing your claim to specialists like Canadian SR&ED helps to maximise eligible SR&ED expenditure in your claim, while improving claim defensibility.
Why energy companies prefer to work with Canadian SR&ED’s advisers
Oil and gas companies that choose Canadian SR&ED as their R&D tax advisers gain the benefit of experienced experts who have been immersed in R&D tax credit claims for more than 20 years.
Our service is affordable because we will only charge you if your claim is successful. Our fee is a small percentage of the refund.
Our simplified procedures make claiming quick and easy, allowing you to focus on your core activities.
To find out more how we can help companies in the energy sector, get in touch.
Soutenir les entreprises qui contribuent au monde grâce à la R-D