How to Secure SR&ED Credits For Your Business

Your company could be eligible for the incentives offered to technology companies by the Canadian government. The government’s goal is to help drive innovation and encourage research and development. With access to the Scientific Research and Experimental Development (SR&ED) Programme, you can discover a generous federal tax incentive program that provides over $3 billion in federal government funding annually to qualified Canadian scientific and technological research projects.

Both Canadian Controlled Private Corporations and individuals owning businesses conducting such projects can claim SR&ED qualifying expenditures. By filing an income tax return with the Canada Revenue Agency (CRA) and including a completed Form T661 you provide the necessary technical information the government uses to calculate the investment tax credit. One of the easiest ways to find out if you qualify is to speak to a SR&ED consultant. However, here we review the application process for the SR&ED program to help familiarize you with the requirements.

How to Submit a SR&ED Claim

If your business is overseeing qualified Canadian SR&ED projects, you can claim SR&ED tax credits when you file your income tax return. Your SR&ED expenditures must be filed no later than 12 months after your filing deadline. You also must complete and submit the following CRA SR&ED forms:

• Form T661 & T661 Part 2
• Schedule T2SCH31, Investment Tax Credit – Corporations
• All Provincial Tax Credit Schedules, dependent on what province is Incorporated in

For detailed information on filing requirements, you can review the SR&ED Filing Requirements Policy here. You must ensure you provide information showing you are an eligible SR&ED candidate, including detailed project information.

Project Information

When you wish to claim your SR&ED expenditures you can choose to list the 20 largest projects in dollar value in Part 2 of the form. However, even if you do just the 20, you are still required to complete all projects claimed in Part 2 of the form and keep it at your place of business so it is available should the CRA request to see it. You must include the cost of every project claimed in Part 6 of the Form T661. If you are unable to do so you will be denied all amounts claimed for the project as SR&ED expenditures. Providing evidence of your expenditures helps avoid issues when claiming SR&ED expenditures.

Having documents relating to the SR&ED activities such as individual timesheets allocating work spent on SR&ED and non-SR&ED work, supervisors’ summaries regarding R&D team activities over a given period, resource planning, etc. all help support the work and costs required during the project. Copies must be readily available to share in the case of a CRA audit. Therefore ensuring detailed records are kept and maintained is important to support your claim. Keep in mind how you choose to fill out Part 2 of the T661 form varies based on how you conduct your business. While some choose to go with a single project, others might have expenditures across multiple projects and fill out multiple T661 forms.

Details Of The Scientific Or Technological Content Of Your Work

To qualify, you will also have to provide details about the scientific or technological content of your work which should include:

• A description of the scientific or technological uncertainties your work is trying to overcome. An easy approach to this area is to consider what your objective is and what improvements you were hoping to make. Compare your starting point knowledge base and any shortcomings you had, to explain the uncertainties you experienced going in.
• The work performed in the tax year in question to overcome the mentioned uncertainties. In other words, how can you demonstrate the foundation and basis of your research? What were your hypotheses to overcome uncertainties? How did you test your hypotheses? What were your results or conclusion(s)?
• Descriptions of the systemic investigation and research you conducted and the new knowledge you gained. This could also be technological advancements you made or where you failed to make advancements. You must prove you made advancements, not that you made improvements to your business. Instead, this section focuses on what scientific or technologically advanced progress you achieve or attempted to achieve during this period.

Your T661 is filed each year, even if your project spans over several years. You can either file the claim with your original tax submission for a fiscal period or choose to wait and then submit an amendment to your taxes. If you choose the amendment option, it must be completed no longer than 18 months following the end of the fiscal year when the expenses were incurred.

If you would like the assistance of a SR&ED consultant, speak to our team today.