THIS CASE STUDY EXEMPLIFIES THE APPLICATION OF KEY LEGISLATIVE REQUIREMENTS FOR ELIGIBLE R&D ACTIVITIES AS THEY APPLY TO RELEVANT ACTIVITIES IN THE FILM AND MEDIA INDUSTRY.
BUSINESS SCENARIO
ViewLine Productions (ViewLine) is an Irish, full-service media company specializing in film production and interactive media integration. As part of the film and media industry, ViewLine Productions is constantly focusing on new product development to remain competitive in the field. It is regularly conducting R&D activities to come up with new technologies to produce the highest quality media products.
To keep up with client demand and the competitive nature of the industry, ViewLine Productions began to reinvent their equipment to produce highly innovative products, special effects and alternative delivery channels.
ViewLine Productions had never claimed the R&D tax incentive before, and was unaware that it was performing qualified research and development. To be eligible for the credit, ViewLine activities had to meet the following criteria:
- Be in the field of science or technology
- Involve one or more of these categories of R&D:
- Basic research
- Applied research
- Experimental development
- Seek to make scientific or technological advancement
- Involve the resolution of scientific or technological uncertainty.
After consulting a specialist, ViewLine realized it was eligible for the R&D Tax Incentive.
VIEWLINE’S ELIGIBLE R&D ACTIVITIES
The R&D tax specialist helped ViewLine determine its qualifying R&D activities, many of which were part of the company’s daily operations. ViewLine’s qualified research expenses (QRE) included:
- Development of new or improved products to meet changing consumer preferences;
- Development of visual effects and animation;
- Development of new media asset management systems;
- New software technologies for computer gaming;
- Improving web-based systems and interactive media.
ViewLine claimed the federal R&D tax credit and a sustainable methodology was also established to help the company identify, document and substantiate eligible R&D projects and costs on an ongoing basis.
WHAT RECORDS AND SPECIFIC DOCUMENTATION DID VIEWLINE PRODUCTIONS KEEP?
Similar to any tax credit or deduction, ViewLine Productions had to save business records that outlined what it did in its R&D activities, including experimental activities and documents to prove that the work took place in a systematic manner. ViewLine Productions saved the following documentation as evidence:
- Project records/ lab notes
- Conceptual sketches
- Design drawings
- Photographs/ videos of various stages of build/ assembly/ testing
- Prototypes
- Testing protocols
- Results or records of analysis from testing/ trial runs
- Tax invoices
- Patent number
By having these records on file, ViewLine confirmed that it was ‘compliance ready’ — meaning if it was audited by Revenue, it could present documentation that illustrated the progression of its R&D activity, therefore proving its R&D eligibility.
