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The Scientific Research and Experimental Development (SR&ED) Program, is a federal tax incentive program designed to encourage Canadian businesses to pursue innovative solutions by conducting research and development (R&D) in Canada.
The SR&ED program and its allocated funds are governed and distributed by the Canada Revenue Agency (CRA). For this reason, it’s important for businesses to prepare and file their claims in compliance with both Canada’s tax laws and the CRA’s established filing requirements.
Specific Canada Revenue Agency (CRA) forms and reports are required to be included with your businesses tax return in order to effectively claim and receive SR&ED tax credits. These could include:
For every SR&ED project you claim, a project description (PD) report will need to be written (in a specific CRA format) which outlines in detail, the SR&ED work performed in the past fiscal year. Depending on the work you do, it is possible you m ay have multiple reports or projects to report on in any given taxation year.
The CRA may ask you to provide documented evidence to support your SR&ED claim. Generally speaking, the best evidence is that which was generated as the SR&ED work was being carried out. Examples of technical evidence include:
Comprehensive financial reporting is also required for all SR&ED claims. Eligible costs include salaries, shareholder salaries, materials and prototype costs, sub-contractors cost and overhead costs. These costs are summarized on the T661 SR&ED form and grouped by SR&ED project.
As with technical reporting, you may be asked to provide materials or documentation to support your financial reporting claims. Supporting documentation may include:
The CRA will typically perform an initial desk review on your SR&ED claim within three months after the submission. If eligible, you can expect tax credits and / or refunds in approximately one to four months from the time of submission. The size of your SR&ED tax credit is most often driven by the amount of labour incurred to conduct the projects you submitted reports for.
Working with an SR&ED expert as well as establishing a SR&ED champion within your organization could help provide guidance by identifying SR&ED projects and opportunities, capturing and tracking all research activities and ensuring you remain in compliance with the approvals process by providing documented results.
In our latest MNP Minute, our National SR&ED Leader Jay McLean discusses effective planning to increase the value of your SR&ED claim.
Whether you are a first-time claimant, wondering if you are eligible, or need help to understand the claims process, our SR&ED Services team can help. Contact Jay McLean, CPA,CMA, P. Eng, MBA, BASc., National SR&ED Leader at 519.772.2986 or [email protected]
Related Topics:Scientific Research and Experimental Development; Financial Reporting
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