SR&ED Claims that Your Corporate Tax Accountant Can Help With
Canada’s Scientific Research and Experimental Development (SR&ED) Tax Credit program can be very beneficial to companies as it contains generous incentives for business undertaking eligible research or experimental development work. The Canadian Revenue Agency (CRA) administers the program and reviews each submission to determine if it is a valid claim or rejects it based on their review and analysis. The important part that must be remembered is that the process does allow for a resolution of any disputes between companies and the CRA. What is required is a clear understanding of what can and cannot be submitted for SR&ED tax credits.
Key Steps to Processing Your Claim
Step #1– Filing is complete?
- All information / data provided?
- Correct / current version of form T661 used?
- Written description of claimed R&D work undertaken that was undertaken in this taxation year (i.e. the “systematic investigation”)?
- Written justification that R&D work being claimed involved seeking a “scientific or technological advancement” and what specific “technological obstacle / uncertainty” obstructed that advancement?
- Wages and other expenditures identified for each project in the claim?
- Details of incoming and outgoing contract payments for R&D services?
- Names and qualifications of key personnel involved in each project?
Step #2 – Received on time?
- < 6 months from year end = fast track processing (120 to 240 days)
- 6 to 18 months from year end = slower processing (8 to 16 months)
- >18 months from year end = rejected and forever lost
Step #3– Technical audit
- Claimed activities meet CRA definition of eligible R&D activity?
- Scientific and technical records and / or working papers corroborate work done in claimed period?
Step #4 – Financial audit
- Taxpayer entitled to claim as CCPC and qualifies for high-rate refundable benefit?
- Invoices and pay records to support claimed costs?
- Time records to support allocation of man-hours to specific projects?
- Any incoming contract payments to reduce the benefit?
Step #5– Dispute resolution (in the event of disagreement with technical or financial audit outcome)
- Second opinion by audit supervisor at local CRA office.
- Notice of Objection – triggers a second audit by a separate independent group of auditors within CRA.
- Tax Court of Canada – taxpayer contests CRA ruling in a formal court process that is completely independent of CRA influence.
Implications for resolving SR&ED disputes
Should you find yourself disagreeing with the CRA on SR&ED project eligibility, or where you find the CRA challenging your project documentation, don’t automatically assume that your claim is invalid. Your technical personnel may be considered as the expert in determining whether a project meets the legal definition under the Income Tax Act. The challenge is understanding the technical aspect of the project with an understanding of tax legislation. That is where a professional Corporate Tax Accountant with SR&ED experience can be of great help.
Can NumbersPlus Help?
Yes, at NumbersPlus we can help you assess the impact of this case on your operations. For details, contact us at 289.290.3322 or email at firstname.lastname@example.org.
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