Each year the Canadian government provides billions of dollars to businesses for developing new or improving existing technologies, products and materials under the SR&ED tax credit program.
The SR&ED program is complex and requires a technical and financial justification of your R&D efforts to the CRA.
About 25% of the SR&ED claim gets audited and your claim stands to get denied or reduced if you have inadequate documentation and time tracking.
Additionally, it takes 18+ months from the start of your fiscal year until you receive your refund.
In this session, we’ll share how to increase your SR&ED claims, reduce audit risk, and get your refunds before they’re filed. Specifically, you will learn:
- What is SR&ED, what qualifies, what to claim,
- How to justify SR&ED tax credit claims to CRA reviewers with detailed documentation and reporting,
- How to automate and easily track labor time and costs associated with SR&ED eligible projects,
- How to get your SR&ED refund before your claim is even filed.
You can download the slides here. We’ve condensed the main points for each section below.
Do I qualify for SR&ED?
- First of all, what is SR&ED? SR&ED stands for Scientific Research & Experimental Development.?It’s a Canadian research and development tax credit that provided over $3.4B worth of investment tax credits to 22,000 companies in 2013.
- Applicable to those in software development, ICT, oil and gas technologies, manufacturing, agriculture, and more.
- Must meet three official criteria to qualify for the tax credit: Technological Advancement; Technological Uncertainty; and Technical content.
- The CRA uses 5 questions to ensure eligibility. Review the questions in more detail in the slides and be sure you can address them.
- Companies large and small as well as privately-owned and foreign-owned can claim SR&ED.
What can I claim?
- Small-medium sized (SME) Canadian controlled private corporations (CCPCs) can claim up to ~64% of eligible salaries, up to ~32% of eligible sub-contractor fees and up to ~42% of materials consumed or transformed.
- Public or foreign-owned companies (or CCPCs over the SME limit)?can claim up to ~36% of eligible salaries, up to 18% of eligible sub-contractor fees, and up to 24% of materials consumed or transformed.
How do I calculate my potential return?
- You can leverage a proxy overhead on salaries worth 55% instead of applying the traditional overhead method.
- The federal portion of returns is 35% and the provincial range from 0-15%.
- We break down the calculations step by step in our Ultimate Guide to Claiming SR&ED.
What do I have to document?
- Documentation must be dated, highlight technical obstacles or challenges, and must be recorded at the time the work was completed.
- SR&ED requires this technical documentation, employee time tracking, as well as proof of payments such T4s and invoices.
How long does it take to process my claim?
- The deadline to file SR&ED is 18 months past your fiscal year-end. If you file within 6 months of that deadline and you’re a CCPC, the CRA will typically process your claim within 4 months. If you’re a non-CCPC, your claim can take up to 12 months to process.
How does the CRA review claims?
- A CRA Review is not a tax audit of your entire company.
- The CRA performs multiple types of reviews: Desktop, Financial, Technical & Financial as well as a First Time Claimant Advisory Services (FTCAS) meeting.
What should I consider when claiming?
- Pay yourself and staff – you can only claim what you spend as it is a cost-recovery program.
- Start time tracking and proper documentation now.
- Incorporate your company and ensure clear IP ownership.
What should I avoid?
- Don’t underestimate the importance of documentation – documentation is what will support your claim during a CRA Review.
- Don’t focus solely on the business opportunity – SR&ED is a technology-first program.
- Don’t leave your SR&ED claim until the last minute – it’s a lot of work. You might as well get your return processed sooner rather than later.
I’m ready to claim. Now what?
You can choose to handle your SR&ED claim in-house or you can outsource the process to Boast.AI.
Boast.AI combines proprietary software with SR&ED experts. Over 500 companies have switched to Boast.AI to increase claims and refunds for less time and audit risk.
- Full-service SR&ED – our in-house SR&ED experts handle your entire claim process, from identifying qualifying work to preparing technical and financial reports to filing and audit defense.
- Quicker access to refunds (12-15 months pre-filing) – use our option to finance 75% of your accrued SR&ED pre-filing at preferred interest rates.
- Access to our TractionConf.io community – including annual conference, monthly Founder-Investor dinners across the US and Canada, and weekly webinars with Silicon Valley CEOs and VCs.