How Do We Know If We Have SR&ED Eligible Projects?
Most software development – regardless of whether it is for internal deployment or are apps for sale or software as a service, slivers of SR&ED eligible activities. If you are developing apps that require leveraging state of the art technologies or developing software that requires stretching the technology envelope, you probably have SR&ED.
Is my IP at risk, if I document it in detail for CRA?
If you have to divulge anything that is proprietary to your business, be reassured that the CRA follows strict security policies to prevent your information from being shared. The CRA reviewer assigned to your SR&ED claim will only look as deep as it needs to be to confirm you are claiming SR&ED eligible activities.
Can we still claim for SR&ED if we already receive IRAP?
Claiming IRAP does not preclude your company from benefiting from the SR&ED program. In fact, IRAP projects usually qualify for SR&ED, however, IRAP payments are deducted from SR&ED expenditures.
Can we claim both SR&ED and OIDMTC?
Absolutely! Similar to IRAP, if you are developing an Interactive Digital Media product, you can also claim SR&ED. However, benefits received from one program must be declared to the other.
Can we claim SR&ED for failed projects?
SR&ED can be claimed as long as the claimant can demonstrate technological uncertainty, technological advancement, and systematic investigation, regardless of the project outcome.
Is it worth the effort with a couple of programmers doing the work?
Absolutely! Software development is very labour intensive, and very expensive labour at that. At the prevalent salary / consulting rates for computer scientists / IT professionals / software engineers, a project even with six months of development effort can provide tens of thousands of SR&ED tax credits. Canadian Controlled Private Corporations (CCPCs) can recover over 70% of salary expenses. That is why almost half the claims are by software development and hi-tech organizations
We have never claimed anything like this before? Is it complicated?
We have an excellent track record with both first time claimants as well as with serial claimants. Key steps of our engagement can be found here.
Isn't documentation for SR&ED Projects very time consuming?
It can take a little longer the first year – we go through emails, meeting minutes, testing sheets, trouble reports, etc. to identify supporting documentation. For subsequent years, we help us establish processes to capture SR&ED eligible activities as they are being performed.
How much time do I have to file for SR&ED? Can I amend an existing tax filing?
You have 18 months from the end of your fiscal year to file for SR&ED. You can amend an existing tax filing any time prior to the end of the 18-month period.
Does an SR&ED audit influence Corporate Taxes?
The SR&ED department of the CRA does not communicate with the other divisions of the CRA — their only interest is in reviewing your claim for the SR&ED program, so filing for the SR&ED program would not result in getting a corporate tax audit. SR&ED program is designed to encourage technological advancements, whereas tax auditors are there to recover tax dollars from taxpayers – very different mandates.