• Who Can Apply?
All Canadian taxpayers who file a T1 or T2 tax return, and develop new products, or enhance/modify/improve existing products or technological processes can apply.
• What Expenditures Are Eligible?
All project-related expenditures can be submitted. These typically include: salaries and wages, materials, work subcontracted to other Canadian taxpayers, and capital equipment.
• How do we know if we qualify?
A common misconception is the belief that the SR&ED tax credit program was created exclusively for the high-tech sector. SR&ED is not performed in laboratories only. It can happen in an office behind a computer or on the shop floor. When modifying a product to make it more durable or precise or when altering an internal process to make it more profitable or efficient, workers are not necessarily “just doing their job.” The work they are doing may actually be experimental development and might qualify for an SR&ED tax credit. Fields which may qualify for SR&ED tax credits and refunds include engineering, design, operations research, mathematical analysis, computer programming, data collection, testing, and psychological research.
• How many years back can be claimed?
SR&ED claims must be submitted within an 18-month window after the end of each fiscal year. If your company’s fiscal year ends on June 30, then December 31, 2010 is your deadline for filing your 2009 SR&ED claim. There are opportunities where companies are able to file two SR&ED claims immediately. In this scenario, your Company will receive a government cheque for both fiscal periods at the same time.
• What is the average refund?
Refunds depend on several factors, including the strength of the projects and your company’s payroll. The average one year refund for our clients is $80,000.
• If our research is unsuccessful, or our experiments fail, can we still qualify for SR&ED tax credits?
Failures, abandoned or postponed projects still qualify for SR&ED credits as long as they meet the eligibility criteria. The success or failure of experimentation is not a factor in determining whether the work performed qualifies for SR&ED credit.
• What if our work is not new?
The eligible SR&ED work only has to be new to your company. Similar or more advanced products and/or process may already exist in the marketplace. As long as you encountered technological challenges that could not be readily resolved using knowledge in the public domain, and you tried to resolve these challenges in a systematic manner, then you are eligible for the SR&ED tax credit.
• How Long Will It Take To Process Our Claim?
Revenue Canada commits to processing refundable claims which are filed jointly with the year-end T2 within 120 days. Non-refundable claims are processed within 360 days. Amended refundable and non-refundable claims are processed within 240 and 360 days respectively. In our experience, most claims are approved within 2 to 6 months.
• Will My Entire Business Be Audited If I Apply For SR&ED?
No. Historically, government auditors enhanced their careers by the volume of dollars recovered from taxpayers. SR&ED - on the other hand - is an incentive program to encourage innovation in Canada. The SR&ED reviews are separate from the CRA audits. For example, Revenue Canada clearly indicates in its publications that the SR&ED reviews do not extend into full business audits.
• We think we qualify for SR&ED. What is the next step?
Our experienced team of consultants can evaluate your company’s eligibility for SR&ED tax credits and refunds, and identify qualifying work and expenditures. Our Technical writers will assist you in writing project descriptions in the most precise and up-to-date language required by the CRA. Our strong service offerings on the financial, taxation ,and technical side enables us to control the quality of the entire claim process resulting in an outsourcing of the entire process to a single source.
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