The Canadian government provides significant funding to Canadian businesses for R&D. The Canada Revenue Agency (CRA), which oversees the Scientific Research and Environmental Development (SR&ED) program, has extremely strict guidelines for how you should present qualifying expenses for SR&ED projects.
It’s crucial to get the technical story precisely right! Take our advice now, save yourself some time, and streamline the Canada tax credit SR&ED claim procedure by putting these best tips into practice.
1. Keep all contemporaneous documentation
Whiteboard images, emails, meeting minutes, and notebooks can all be very helpful in defending your work. As soon as you can, set up a system for collecting and storing this data. This is particularly crucial if you decide to use the standard way rather than the proxy method to figure out acceptable expenses because each amount claimed needs to be acknowledged and supported.
2. Describe the technological ambiguity and the methodical study you are conducting
The accelerated SR&ED funding program’s goal is to encourage ventures that run the risk of failing commercially. The CRA is less focused on your economic success and more interested in how you attempted to systematically research a gap in the existing body of knowledge.
3. Timesheets are crucial
Salaries related to the SR&ED effort typically make up the majority of expenses claimed. Utilize automated time-tracking software to keep track of the time spent on particular projects. When putting together your claim, this can save you time.
4. Increase forecasting accuracy with historical data
Although granular data is often the most crucial, previous project data can also support your argument. You can use historical data from previous projects to help you plan for future R&D projects and SR&ED tax claims if you compile this data.
You can use historical data as a resource to get information about previous projects and tax credits to carry out your self-audit and assist your company in identifying any areas where you might not be able to pass a CRA audit. Additionally, using past data can help you continuously link an educated estimate to your SR&ED tax claim, which can then be used to support financial planning.
5. Collect granular data to justify claims
As was briefly mentioned before, the greatest claims don’t employ ambiguous data; instead, you need to track hours and cost breakdowns by user and project. Typically, the CRA will make the following suggestions to claimants during an audit:
- Documentation should show the steps taken in methodical research, such as the creation of a hypothesis and the pertinent testing operations in a certain area of science or technology.
- To link wages and material costs to permissible SR&ED activities, documentation should detail who contributed to which projects and for how long.
6. Stop discussing technical stuff over email
An email has a way of bringing you down. It takes a lot of work to keep up with folder and category systems for your email. 87% of workers say they struggle to maintain accurate and full timesheets every day. To measure time in the past, they instead rely on email history and other records, which leads in lost productivity and inaccurate timesheets.