Canada has one of the most generous tax credit programs in the world. The Canadian government is eager to reward innovation in Canada, and their primary means of doing so is through the Scientific Research and Experimental Development (SR&ED) program, awarded by the Canadian Revenue Agency (CRA). Every year, businesses across Canada receive over $3 billion in rebates from the CRA for their successful SR&ED claims.
Annually, that $3 billion is shared across over 20,000 businesses. Despite this, the SR&ED program is massively under-utilized. Hundreds of Canadian businesses, whether they realize it or not, are leaving money on the table by not applying for SR&ED tax credits. There are a few reasons for this, chief among them is that many business owners and employees don’t even realize the work they’re undertaking is eligible to be claimed! Another common reason that businesses don’t claim the money available to them is simply that they don’t have the time to research, write the claim, and uphold it to the CRA.
That’s where we come in. We are experts in specialist areas of tax incentives, specifically SR&ED. With over 15 years experience, we have identified over $729m in tax benefits for our clients to date, with an average client benefit of over $100k. With many years of experience, and having helped hundreds of our clients successfully claim their SR&ED projects, we’ve compiled our top 5 tips to ensure your SR&ED claim application is accepted.
Diligently track time spent against your projects, even if you’re unsure whether you will be making a SR&ED claim in the future. Time tracking is important for a few reasons. The first is that time tracking is crucial for demonstrating the level of effort and resources that were invested in the SR&ED work. This can help to strengthen the overall claim and increase the chances of it being accepted by the CRA. Second, salary and wages are eligible expenses to be claimed in the SR&ED process. However, only the portion of the salary or wages that can be attributed to eligible work can be claimed. To determine this, it is necessary to track the time spent by employees on SR&ED activities.
Keeping details of all past prototyping activities during the lifecycle of a project is critical for applying for SR&ED because it can help to demonstrate the iterative and experimental nature of the work that was done. When you are able to provide the CRA with demonstrable steps in how the project progressed through a series of prototypes or experimental models, the case for technical innovation and creativity is stronger.
Be sure to track all expenditures as they relate to the project in question. Account for all costs relating to salaries & wages, materials & supplies, payments to subcontractors, overhead and indirect costs, and capital expenditures. All of these expenditures can be claimed against your project during a SR&ED application. Maintaining accurate records and documenting all eligible expenditures will only serve to strengthen your SR&ED claim, and increase the amount you are able to be reimbursed when accepted.
Provide thorough supporting documentation. The quality, quantity, and relevance of the documentation all have an effect on the outcome of the SR&ED claim. This documentation can include project plans, lab notes, test results, technical reports, and other relevant records.
Project governance documents such as project scope documents, budgets, timelines, and descriptions of technical uncertainties to be addressed by the project are all important.
Lab notes and test results should be detailed and well organized, clearly outlining the results of each test and relevant technical data.
And where applicable, provide design documents that describe the design and development of the prototypes, software, or other technical materials.
During the application process, communication with the CRA regarding your claim is critical. The quality and clarity of communication between the business and the CRA during the claim process will without question have an outcome on the result of your claim. Ensure that you provide timely responses to CRA inquiries, and provide complete and accurate information as requested.
The steps involved in making a successful SR&ED claim may seem daunting, but we’re here to help. As one of the leading Canadian SR&ED consulting firms in the industry, we have handled hundreds of claims for our clients, and we enjoy an impressive claim acceptance rate.
If you would like to discuss your project and its SR&ED eligibility, get in touch. We would be happy to discuss your project free of charge during a complimentary discovery session. Simply reach out at enquiries@catax.com, or call us at 604-692-8863.
