Canada's 2013 Budget introduces measures to address a minority of claims where the risk of non-compliance is perceived to be high and eligibility for the SR&ED program unlikely; specifically, it proposes a $1,000 penalty for missing, incomplete or inaccurate information about SR&ED program preparers and billing arrangements.* This measure would help CRA characterize the approach deployed by consultants in preparing the claim, and help identify those that believe in ‘throw and see if it will stick’ approach. On the other hand, it will help those who perform the requisite due diligence, and submit only those projects that meet the intent of the program and are most likely to get approved. These consultants make CRA Reviewers jobs easier by vetting the projects and weeding out the ones that are not likely to make the cut.
Annex 2: Tax Measures:
Supplementary Information and Notices of Ways and Means Motions
Scientific Research and Experimental Development Program
Budget 2013 introduces measures to provide the Canada Revenue Agency with new resources and administrative tools to better respond to the minority of Scientific Research and Experimental Development (SR&ED) program tax preparers and SR&ED performers who participate in claims where the risk of non-compliance is perceived to be high and eligibility for the SR&ED program unlikely.
One of these measures will require more detailed information to be provided on SR&ED program claim forms about SR&ED program tax preparers and billing arrangements. In particular, in instances where one or more third parties have assisted with the preparation of a claim, the Business Number of each third party will be required, along with details about the billing arrangements including whether contingency fees were used and the amount of the fees payable. In instances where no third party was involved, the claimant will be required to certify that no third party assisted in any aspect of the preparation of the SR&ED program claim. This information will facilitate the identification of SR&ED program claims with a higher risk of non-compliance.
In order to support the requirement to provide more detailed information, Budget 2013 proposes that a new penalty of $1,000 be imposed in respect of each SR&ED program claim for which the information about SR&ED program tax preparers and billing arrangements is missing, incomplete or inaccurate. In the case where a third-party SR&ED program tax preparer has been engaged, the SR&ED program claimant and tax preparer will be jointly and severally, or solidarily, liable for the penalty.
This measure will apply to SR&ED program claims filed on or after the later of January 1, 2014 and the day of Royal Assent to the enacting legislation.