Top Filing Myths for Filing a SR&ED Claim
The Canada Revenue Agency (CRA) started the Scientific Research and Experimental Development (SR&ED) program over 20 years ago. Some misconceptions have arisen about the program that have prevented eligible companies from claiming all that is eligible, or even from filing at all.
Myth #1: We do not have SR&ED!
This is the most common misunderstanding when it comes to the SR&ED program. Most businesses have SR&ED, even if it is on the small scale. We have seen SR&ED happen in every industry — from traditional manufacturing to the service industries. It is worthwhile to consult an SR&ED professional for an expert opinion — this will help you identify project activities when they do happen.
Myth #2: SR&ED is Limited to R&D Lab Work
Potential SR&ED projects exist in any business scenario — not just where someone is wearing a lab coat. Your employees who do not have formal training in their background often become technical experts by experience, and these employees are continually developing new products or processes. SR&ED typically happens on a daily basis, out of the necessity to stay in business.
Myth #3: Our Secrets are at Risk
The CRA reviewer assigned to your SR&ED claim will only look as deep as he or she needs to in order to confirm you are claiming SR&ED eligible activities. If you have to divulge anything that is proprietary to your business, be reassured that the CRA follows strict security policies to prevent your information from being shared.
Myth #4: We Have no Documentation With Which to File
Even though you don’t necessarily believe that you have documentation, it’s very likely that you do. It can include meeting minutes, time sheets, samples or sketches. We work with you to pull together the best documentation for your claim, and help you put new ways to track your SR&ED projects in place.
Myth #5: Claiming for SR&ED Might Call a Corporate Tax Audit on Our Company
The SR&ED department of the CRA does not communicate with the other divisions of the CRA — their only interest is in reviewing your claim for the SR&ED program, so filing for the SR&ED program would not result in getting a corporate tax audit.
Myth #6: We Already Receive Government Funding and Can't Claim SR&ED
SR&ED is one of the most generous forms for R&D funding in Canada. It isn’t industry or sector specific like a lot of other available funding, and projects that satisfy the eligibility criteria can be found in any business scenario. Because the SR&ED program focuses solely on R&D work, you can still apply for additional funding on top of existing grants.
Myth #7: It's Not Worth the Effort
Canadian Controlled Private Corporations (CCPCs) can receive up to 72.7% on approved labour expenses. A project that involves just a few employees can easily exceed a few hundred thousand dollars in claimed expenses.
Myth #8: Tracking SR&ED Projects is too Time Consuming
You are probably doing a lot of tracking without realizing it, through meeting minutes, testing sheets, etc. We will work with you to identify projects and processes, as well as putting tracking into place while your SR&ED projects are ongoing — this way, all costs can be captured as they are being incurred, and there isn’t the possibility that something is overlooked.
Myth #9: Nothing Can Be Done About a Rejected Claim
As long as it is not 18 months past your fiscal year end, you can submit an amendment to your claim. Also, if you believe the reviewer did not fairly implement the SR&ED guidelines during the review, you can file an appeal.