Policy direction by the Canada Revenue Agency (CRA) has shown an increase in the number of reviews of Scientific Research & Experimental Development (SR&ED) claims in Canada. This has added a new challenge to companies who wish to capitalize on SR&ED – a generous R&D tax credit incentive which pays more than 20,000 eligible Canadian Controlled Private Corporations, mostly SMEs, in excess of $3 Billion (CDN) each year.
Due to policy decisions of the CRA, SR&ED compliance has become an increasingly hot topic, and SMEs are trying to better understand the SR&ED program and to ensure that their claims comply with both the intent of the program and the documentation required by the CRA to support their SR&ED claims.
SR&ED compliance refers to following the requirements of the SR&ED program through a full understanding and attention to the type of documentation required of the CRA.
The SR&ED program mission
To meet the requirements of SR&ED, eligible projects have to meet certain requirements set out by the CRA. On a basic level, the project must advance the company’s knowledge, and the experimentation must take place in a scientific manner – with a hypothesis and documented trials that show advancement of knowledge in a systematic process.
Over the past few years, the Government of Canada has been attempting to make the SRED program more efficient and targeted. The changes attempt to ensure that SRED program funds are meeting the mission of the program – to propel Canada’s advancement of technology.
How can your organization improve SRED compliance?
With increased scrutiny on SRED claims, it’s more important than ever to utilize the services of a professional SR&ED services firm. Experts who specialize in SR&ED claims have years of experience in identifying eligible costs, stay on top of changes in SRED policy and have a working knowledge of the CRA’s requirements and review process.
Identify the projects the qualify for SR&ED
A great deal of company resources can be wasted by documenting projects that turn out to be in-eligible for SRED. It makes sense to employ an expert to help you scope out new projects and determine what projects or parts of projects would be eligible.
Document your SR&ED claim during the project
Once whole or parts of projects are identified as SRED eligible, it is important to have a system to document the project outcomes and track resources throughout the project, not afterwards. The correct information must also be the focus of the documentation. When reviewed, the CRA will be looking for documentation that proves a systematic exploration of a hypothesis and clearly shows the steps taken and the reasoning behind them.
Over documenting a project can be just as troublesome as under-documenting or misdocumenting. Wasted employee resources and frustration are often the reasons that companies give up on the SR&ED process and it therefore undermines the viability of future SRED projects.
Our SR&ED Consulting Services
Enhanced Capital Recovery has years of experience aiding clients in SR&ED compliance. We take care of the preparation of SRED claims with the most up to date information available.
If reviews do occur, we’re there to support clients during a review. We also help clients who prepare their own SRED claims by providing a third party review or helping to defend a claim.
If your SRED claim is under review or you want to capitalize on a claim either now or in the future, contact us to find out how we can help. We’re happy to provide more information through a free consultation.