Here are the slides Jeff Christie presented during the “Do’s and Don’ts of Claiming SR&ED Tax Credits” webinar on Thurs, Feb 19:
We’ve condensed the main points for each section?below for you review. Keep in mind that?our Ultimate Guide for Claiming SR&ED Tax Credits (an interactive eGuide) dives into these topics in more detail.
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 for 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 slide 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 are 35% and the provincial varies. In Alberta and British Columbia, the provincial portion is 10%.
- We break down 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 financial statements such as T4s.
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 return 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? (The Do?s)
- 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 – before it’s too late.
- Incorporate your company and ensure clear IP ownership.
What should I avoid? (The Don?t?s)
- 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 a professional consulting firm.
- Consider how you want to spend your technical team’s time.
Any questions? Feel free to contact Jeff Christie directly at jchristie (at) boastcapital.com or reach out on our Contact Us page.