SR&ED Articles
Tracking Project Costs for SR&ED Tax Credits
CRA regulations allow you to file SR&ED tax credits within 18 months after the fiscal year end. This means that you can conceivably file for the past 2 years of R&D costs. Let's assume that you expended $500,000 in R&D for each of the past 2 fiscal years. Up until the fiscal year end of 2010, you could potential reclaim up to 44.1*% of this figure (I.e. $441,000*), if you could only get your claim filed on time!
The CRA requires that you be able to account for your valid SR&ED-eligible expenditures, but if you're like most companies who have just found out about this program, you likely have not tracked any your SR&ED-eligible activities.
On the other hand, if you're a business owner, you also don't want to miss out on $441,000* of SR&ED tax credits! So what can you do? Well, if you're a first time-claimant, you're encouraged to make reasonable allocations as to what your costs were while in the process of performing: (1) hands-on and directly-engaged SR&ED activities, (2) directly-engaged supervision, and (3) supporting SR&ED activities.
According to CRA, all activities related to resolving technical uncertainty, provided that they are above and beyond the technological baseline, are eligible for the SR&ED tax credit program. In addition, all activities that were commensurate with these hands-on activities also qualify. To obtain a fair allocation for these hands-on and supporting activities, it's best to acquire the services of a SR&ED consultant. Consultants will help you to identify all eligible costs, and to quickly file your SR&ED tax credit claim on time, so that you do not miss out on this opportunity.
After you have filed your first SR&ED tax claim, a consultant can also help you to devise a SR&ED cost-tracking system for all future claims. Ideally, a program needs to be put into place that allows all SR&ED-eligible costs to be tracked in real-time. Working with the consultant, all SR&ED-eligible costs can be identified ahead of time, so that they can be captured as the costs are incurred. Thus, working with a consultant can help you to facilitate and streamline your entire SR&ED tax credit claim process.
