Mathis considers leaving Atlantic Canada over treatment under SR&ED program

Apparent inconsistencies in the application of federal tax credits for industrial R&D may force one of Atlantic Canada’s most promising knowledge-based firms to leave the region and possibly even Canada. Mathis Instruments Ltd, Fredericton NB, says it has more than $1 million in legitimate claims for scientific research and experimental development (SR&ED) tax credits that have been refused, representing one year’s worth of R&D spending.

Company co-founder, president and CEO Dr Nancy Mathis says inconsistencies in the way the SR&ED program is administered by the Canada Revenue Agency in Atlantic Canada is patently unfair and after two years of discussions the situation has not been rectified.

“They’re drawing a line between development that’s allowed under SR&ED and what’s just engineering,” she says. “We believe we do engineering with a strong development component to produce new devices that have never been done before. It’s definitely experimental engineering.”

Mathis had received SR&ED credits in the past but it wasn’t until 2003 and the arrival of VP finance Peter Voss that it was discovered that many unsuccessful claims were apparently legitimate.

“When we engaged Peter Voss, he looked at the claims and said we were missing a lot of money,” says Mathis. “We now have a consultant with national clients who also brought the disparity to our attention.”

If the situation cannot be resolved, the company may have to relocate to another part of Canada where Mathis contends SR&ED claims are processed differently

“It’s gotten to the point of being strangulating. It may drive us out of the region and that’s a hard decision to take,” she says. “Either that or restain our research activity or outsource it. In order to do this research and stray on the cutting edge of the field you’re in, the funding has to come from someplace.”

Founded in 1995 by Mathis and her husband Chris, privately-held Mathis Instruments designs and develops novel thermal sensors that are used for many applications in a in a wide range of industrial sectors. It has received financial support from many public and private sources, including $7.5 million in venture capital from a consortium of investors in 1992.

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