SRED Tax Consultants | Conceptinero | Ontario | https://conceptinero.com
The Scientific Research and Experimental Development (SR&ED) Program is a federal tax incentive program that encourages Canadian business to reach technological advancement by conducting systematic investigation when they are faced with technological uncertainty. The Canada Revenue Agency (CRA) administers the program and issues your company with a tax credit of up to almost 70% of the cost of your R&D.
As SR&ED consultants, one of the most frequent questions we get from our clients is about the financial part of the SR&ED documentation that is required by the CRA. Supporting information and records are required to prove the work performed and the expenditures made so that you’ll receive your tax credit promptly.
The challenge is, however, that if this is your company’s first time filing, you may not be fully aware of all of the CRA’s documentation requirements.
Supporting evidence is key. The CRA is looking for signed and dated documentation that delivers clear information on expenditures that took place during, and not after, your SR&ED work. In addition, you have to support your claim with contemporaneous documentation of your research and development processes as well as any challenges that did arise in the process.
A good rule of thumb is to keep and record absolutely everything involved with your SR&ED projects.
Records for your SR&ED expenditures should not only include an electronic accounting ledger, but also all company financial statements, records, journals, vouchers, and paper and electronic source documents , invoices, proof of payment, timesheets, and payroll records throughout the tax year. Records can also include plans, experiments, progress reports, and communication between team members. Connecting your day-to-day correspondence to these expenses can provide ease for a financial review if it becomes necessary.
To make an SR&ED claim that passes muster, you need to keep copies of all of your invoices and receipts. In fact, documents that were originally produced in one format ought to be stored in that format, unless they are reproduced. In other words, if you’ve received a paper receipt or electronic receipt, it’s best to retain those original documents.
There are ways to convert paper documents to an electronic form. Electronic image formats are acceptable if they are accurate, display the exact same information as the original, and match the original in terms of clarity, resolution, and hue.
It’s also critical to remember that, in case of an SR&ED claim review, a logbook has to be kept with information about how paper documents are captured in electronic images. For each electronic copy these logs should include:
To know if your business system meets CRA record-keeping requirements, understand that the CRA needs to be able to easily evaluate your electronic data files, their internal controls, and the overall reliability of your documentation. The more that you build transparency into your systems before your SR&ED project begins, the less likely you are to run into problems down the line.
Think of the process of preparing an SR&ED claim as simultaneously preparing a viable audit trail. An audit trail is a clean and clear series of records linking everything you do during your SR&ED project to everything you pay for and settle in your accounting spreadsheets and financial statements.
All supporting evidence and contemporaneous documentation listed above needs to be included, but you should also include:
We are a full-service professional SR&ED Consulting Firm specialized in the Medical Science, Software and Manufacturing industries. We have a 95% success rate in getting CRA to refund up to 65% of your research and development costs.
We engage with you to assess the technical and financial viability and make sure your claim gets approved by CRA without an audit. We have submitted $50M in claims to the CRA. Over 320 claims were accepted as filed, for an average $146,000 per company.
Unlike larger SR&ED consulting firms, we offer full service from an individual consultant who gets to know your team and fully manages your CRA claim. We don’t expect you to do the heavy lifting, which means maximum results with minimal input from your team so you can focus on your business.
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