The Scientific Research & Experimental Development (SR&ED) tax incentive is a government program meant to subsidize the research and development costs of Canadian businesses of all sizes, from all industries. However, while the program is of great potential benefit to many companies, it is administered by the Canada Revenue Agency (CRA), and has a number of strict requirements that must be met in order to qualify:

Log Your Expenses

As with all your business expenses, the CRA requires you to log all expenses you accrue related to research and development.

It’s important to remember that this applies to all expenses, including equipment, raw materials, production overheads, facility costs, and claims related to employees’ time. Make sure employee time sheets indicate specific hours which are to be claimed as SR&ED expenditures.

Keep Your Documentation

While simply hanging onto the receipts may be enough for tax returns, SR&ED claims will often require documentation relating to the research or education itself.

This could include a range of dated documents, including reports highlighting the need for R&D (such as uncertainty or inefficiencies discovered), minutes from meetings discussing the research, test results, and so forth.

Own Your Failures

It is very common for business leaders to want to hide or avoid mentioning their failures. However, when it comes to R&D, failure is an important part of experimentation—and is still applicable to the SR&ED tax credit. Make sure that you keep records and documentation of your failed research efforts as well as your successes to support (or enhance) your SR&ED claim.

File for Unforeseen Expenses As Well

Any research that goes over-budget can be claimed—including research that might not otherwise be eligible for the tax credit. For example, if you perform R&D for a third party, you will not be able to claim your own expenses for conducting their research (as they will be the ones paying for it)—however, if the project goes over-budget, you may be able to claim the overage.

Consult With the Corporate Tax Advisors at Fuller Landau

At Fuller Landau, our corporate tax advisors can ensure that your SR&ED credits are properly filed, help you determine financing strategies that can maximize the benefits of your tax credits, and provide general tax planning and consultation services.

For a complimentary consultation with one of our Toronto corporate tax advisors, contact us today.