This is one thing that people ask us about all the time – whether the CRA reviewing your SR&ED claim will cause the CRA to call a tax audit on their company.
I can understand why they would be worried about this. A tax audit can take up a lot of your time, is a lot of work, and can be a headache to get through. One would want to avoid a tax audit if one could.
So, it’s a relief to learn that an SR&ED review, in fact, will not trigger a tax audit. Because the SR&ED division of the CRA operates separately from other divisions, what happens in regards to your SR&ED claim stays within the SR&ED division of the CRA, and the results of your SR&ED claim does not determine whether the CRA will call a tax audit on your company.
A misconception often made with the SR&ED program is that a company can claim a full business project, instead of just the SR&ED activities that happen within the business project. The SR&ED program looks at activities where you have come across an obstacle, worked systematically to solve that obstacle, and somehow advanced your knowledge on the technologies involved; an SR&ED project is basically a subset of your business project.
Even when you are developing a brand-new project, SR&ED eligible activities don’t happen immediately. A good rule of thumb to remember is that SR&ED activities only begin once you face your first obstacle, which could be on the first day of development, or could be two months down the line.
Next time you start looking for SR&ED projects that you are involved in, remember to ask yourself where you first ran into technological problems with your business project.
The City of Toronto recently released an ICT (Information and Communications Technology) Report, which takes a look at a number of items regarding investing in business in Toronto – including the state of Research and Development in Toronto. While the whole report is worth taking a look, the section on R&D is really what caught my eye. Some points of interest include:
- The fact that many of Canada’s Top 100 Corporate R&D Spenders have a location in Toronto – typically either a research facility or the corporate headquarters. In 2009 alone, these companies invested over $2.5 billion in R&D.
- The National Sciences and Engineering Research Council of Canada (NSERC) awards approximately 30% of NSERC university funding to Toronto university projects.
- Canada is the third highest producer of publications relating to ICT. On a per-capita basis, Canada is the second highest contributor to articles published in the ICT sector.
The full report also takes a look at investing, talent and the workforce in Toronto.
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