Frequently Asked Questions About SR&ED

Q1:           “My business isn’t rocket science.  Would it qualify?”

                 Any manufacturing field, as well as information technology and all of the physical sciences can qualify.  There are a number of exclusions regarding the types of expenses and work that is claimable, but generally any expense that supports purposeful experimentation is considered.

 

 

Q2:           “So I can claim my design and process engineering team, or the continuous improvement program?”

                 No.  Expenses are approved on a project-by-project basis.

Q3:           “What is a qualified SR&ED project?”

                 A SR&ED project must have technological uncertainties or obstacles, resources spent trying to resolve those uncertainties by trying different approaches, and a technological advancement in the end.  This last one could be learning what NOT to do.  The objective can be an improvement (even an incremental one) in your product or process.  You don’t have to be  the first to achieve the advancement, but the lessons learned should be proprietary.  If you’d share it all with your competitor, it’s probably not what CRA is after.

Q4:           “Is there a limit to the number of projects I claim, or the size of my claim?”

                 There is no limit to the claim or the benefit, unlike the $50k limit for IRAP grants.  Also, unlike other technology incentives such IRAP and SHARP (an Ontario program), your SR&ED claim does not compete with other claimants for funding.  As long as you can convince CRA that it meets the requirements then you will get credited.

Q5:           “When do I submit a claim?”

                 SR&ED claims are submitted with your corporate tax return.  Only expenses incurred in a fiscal year can be claimed for that fiscal year.  You have up to 18 months after a fiscal year end to file.  This means your first claim will likely be for the last 2 fiscal years.

To contact IncreTech:

Phone: 905-481-2228

E-mail: info@incretech.ca

Q6:           “If I submit a SR&ED claim, might it result in a general audit?”

                 I have never had a case where a client’s SR&ED claim has led to a general tax audit.  All claims get reviewed by both a technical and a financial reviewer at CRA, however.  Often, they conduct site visits to review the projects in person, though the trend is toward bench reviews.

There are volumes of SR&ED program information available at the CRA web site.

Please contact IncreTech if you have any other questions or if you would like to arrange a free no-obligation consultation.  There’s nothing to lose.

 

 

SR&ED is available to all Canadian manufactures and many service companies.

@ 2008 IncreTech

Q7:           “I’m a bit confused about the new SR&ED form (T661) questions.  Have the basic                  requirements changed?”

                 So far, the answer appears to be no.  CRA says the reason for the change was to make the application process clearer to applicants and easier to review.  While the new form will likely result in less judgment calls on the part of CRA Reviewers, it requires more on the part of the applicant.  Many more questions must be answered, and the responses are space limited or multiple choice.  Many applicants will find that none of the new Technology Codes apply very clearly to their situation.  There is a new emphasis on relating your project to the “underlying technology” (such as Applied Mechanics) that may require responses to become more academic than before.  However, CRA has indicated that the existing application policies are still applicable and that a project that qualified before should still qualify.  Time will tell the practical effect of the new format.

IncreTech Corp.

SR&ED (R&D) Investment Tax Credit Consultants.