Posts Tagged ‘SR&ED program’

With the number of government grants, loans and other assistance available, we have frequently been asked whether companies can still file for the SR&ED program if they’re taking advantage of other assistance programs. There are so many different programs available: from IRAP, to small business grants, to funding that will help make things more energy efficient, to workshare programs, just to name a few.

So what does this mean when a company files for the SR&ED program? CAN a company get money back through the SR&ED program if they’ve already received some sort of government assistance for the project?

Well, the short answer is both yes and no.

Mainly, it depends on how much of your project was covered by other government assistance programs. If your project was fully-funded by other grants and loans, then your project is unfortunately not applicable for the SR&ED program.

Or, as it more often happens, if your project was only partially funded by the government, then you can claim for SR&ED on the portion that was not funded.

The SR&ED program is vital for any Canadian business doing work that runs into technological obstacles – don’t forget to include it in your funding plans.

After you’ve filed your SR&ED claim, there is a bit of a waiting period before you will hear back from the CRA. When that waiting period is done, one of two things may happen – you may hear that your claim has been Accepted as Filed, or the CRA may ask to review your claim with you. There are two different types reviews that can happen: the technical review and the financial review. You may be asked to have one, the other, or both types.

The technical review will look at the SR&ED work that you’ve done, in order to confirm that your projects are eligible. The reviewer will be looking for obstacles, will be looking to see that some sort of advancement in your knowledge has happened, and will be looking to see that you have the documentation to support the obstacles and advancement.

The financial review will look at all of your financial information involved with your SR&ED claim, in order to confirm that you have claimed the correct costs for each project. Again, you will need the proper documentation to support the financial information.

Some consultants and accounting firms shy away from CRA reviews. Some do not guarantee that they will be present with you when your review happens. Northbridge embraces the CRA review for a couple of reasons:

Firstly, especially if this is the first time that you are claiming, the CRA reviewers want to meet with you to make sure you understand the SR&ED program.

Secondly, if a review isn’t requested it is usually because you have claimed less than you could be eligible for.

One last thing to make note of in regards to CRA reviews – having a CRA review does NOT meant that you will get a tax audit. The SR&ED division of the CRA works separately from the tax division, and no information is passed on to the tax division from your SR&ED claim.

There seems to be an endless amount of paperwork required to keep a successful business operating efficiently and effectively these days. With all of the different regulatory, industry association requirements and internal documents to deal with, adding another heap of tediousness might seem counterproductive. Northbridge clients know that Research & Development document control is one of the most critical in daily operations because it directly impacts the company’s revenue stream; if you don’t keep proper R&D records the CRA has the right to refuse your annual claim outright. Here are some quick and easy ways to ensure at least a bare minimum is being adequately logged:

1. Keep any emails discussing projects involving installation of new machinery, new products, or improvements to existing processes and products. A great way to effectively database these emails, company-wide, is to set up an email were employees can forward relevant emails which pertain to projects on the go (i.e.: research@company.com). This also ensures that if someone deletes their Inbox folder accidentally that the backups are still available.
2. Meeting notes and other logs of discussions are very useful in tracking project development. The compiling of typical and project info talked about during meetings shows that there is an ongoing environment in the organization which promotes and encourages innovation and puts specific timelines on issues and projects which are traceable.
3. In certain manufacturing environments it is hard to sit down at a computer and allocate time to projects and fill in spreadsheets (especially if there’s no computer in that department!). In these cases a simple log book or printout of a spreadsheet will suffice, it’s getting the technically ‘un-savvy’ personnel to fill it out on a daily or weekly basis which could be a challenge.
4. There are many companies which employ external quality assurance programs such as ISO and GMP measures, these systems generally have templates which can assist in the detailed tracking of R&D projects. The resident QA/QC manager should have access to this information through an available add-on for additional purchase.

While this is the bare-bones of what the CRA would require there are many other easy and effective ways to implement project tracking. There are key elements which the CRA looks for and if they are missing it could mean a rejected submission. For first time filers this rule is somewhat relaxed but going forward a company is required to keep proper documentation to ensure effective internal management of the SR&ED program. Northbridge gives (free of charge) each and every client the tools and training they need, on a department basis, to successfully track projects which means no hassle the next time around!