Creating a SR&ED Mindset
Written by:
Pierre Pinet, SR&ED Team Leader.
The age old adage “you don’t get something for nothing” certainly applies in the case of SR&ED tax credits. Whether you use a consultant to assist you in preparing your claims or are comfortable in doing so with resources internal to your organization, you must be prepared to adjust your practices to be able to identify the eligible opportunities and then capture the information necessary to ensure success.
There are three important tasks for which the potential SR&ED claimant must take responsibility in order for them to be able to gain the maximum benefit offered by the SR&ED program. They are as follows;
- Maintaining constant awareness of ongoing development activities in order to identify potentially eligible projects
- Collecting and recording the high level information in order to distinguish these projects from others and provide an identity to which activities and resources can be associated.
- “Tracking” the projects throughout the year to ensure that any supporting materials are easily located and can be made available should they be required at the time a claim is filed.
Unfortunately, as is often the case with items relating to the filing of tax returns, many organizations choose to procrastinate and leave the preparation of SR&ED claims to after the conclusion of their fiscal year, meaning that the exercise becomes one of forensic investigation rather than of simply collecting information as related activities are taking place. Although the SR&ED program does provide up to 18 months past the end of the fiscal year to file a claim, the merits of preparing your claim as early as possible should be obvious. Where investing no more than 30 minutes per week over the course of the year will lead to more thorough documentation and lessen the overall burden on affected employees, leaving it to the last minute will inevitably turn it into a very demanding exercise involving searching for relevant data and supporting documentation that may be many months or even years old.
The CRA has an obligation to the taxpayers who fund the SR&ED program, and so it is critical to their mandate to ensure applicants have the necessary documentation to support their claims. By instilling a mindset amongst affected employees that identifying SR&ED eligible opportunities and collecting the information and documentation on an ongoing basis, the amount of time you will need to invest in total will be minimized and your ultimate probability of success will improve accordingly. Some simple practices to help establishing the appropriate mindset include;
- Identifying and gathering all affected employees at the beginning of the Fiscal Year to review the SR&ED program and reiterate its importance to securing funding important to your company’s R&D efforts
- Challenging key employees to work through the year to help maximize the claim and make SR&ED success a key performance measure for the business
- Establishing convenient repositories for pertinent materials (e.g. a clearly identified location (physical or digital) to store pertinent documentation and an email address for “SR&ED” that everyone agrees to copy on correspondence and meeting notices relating to potentially eligible projects)
- Review new or ongoing projects every month to identify those which could be SR&ED eligible and should therefore be tracked
