The Canadian Liberal Finance Minister tabled his first federal budget on March 22, 2016. The focus was on economic growth and job creation as promised during the Liberal election campaign. So no big surprises in the budget but there were some surprising consequences to meeting the election promises, mainly the 3x larger budget deficit which ballooned to $29.4 billion dollars for 2017 fiscal year.
The budget focused on economic growth, job creation and a strong middle class, the minister outlined plans to make investments in infrastructure, health care, postsecondary education, innovation, clean energy, and to introduce a Canada Child Benefit program.
When claiming SR&ED it’s important to note that the Income Tax Act (“ITA”) specifies the following exclusions:
1. market research or sales promotion,
2. quality control or routine testing of materials, devices, products or processes,
3. research in the social sciences or the humanities,
4. prospecting, exploring or drilling for, or producing, minerals, petroleum or natural gas,
5. the commercial production of a new or improved material, device or product or the commercial use of a new or improved process,
6. style changes, or
7. routine data collection;
While some of these seem obvious, number 2, quality control or routine testing is not. The definition begs the questions – what is quality control? What is routine?
Are you frustrated with the CRA’s administration of the SR&ED program? Do you have issues with how the review of your last SR&ED claim turned out? You are not alone and there is hope! The CRA is listening, now lets see if they follow through.
The Boast Capital team had the privilege of attending a SR&ED practitioners’ session hosted by the CRA and had the opportunity to listen to directors of the SR&ED department from Ottawa and regional directors and managers within the SR&ED department. SR&ED practitioners from many different firms were invited to listen to the CRA and participate in a Q&A session.
The amount of compensation a business owner-manager can claim for SR&ED tax credits is limited by their company’s structure, or the manner in which they compensate themselves. Here are three common pitfalls that you need to watch out for:
You’ve filed a SR&ED claim that was selected for an audit and you’ve met with the technical and financial representatives from the CRA to review the claim in detail. The discussion seemed to go well, although the CRA didn’t indicate in the meeting whether or not the claim would be approved. Now, you’ve received a SR&ED review report from the CRA and they are proposing to significantly reduce your claim. What do you do next?