Methodology, Eligibility and Documentation
Successful SR&ED claims are built by, engineer driven industry experts, like the Technology Initiatives Group Ltd. For claim purposes preparation is the key to a successful tax claim, as well as protection against any CRA audits or reviews.
SR&ED program experience is required to validate:
- Your advances and content
- The experimental methodology and
- Technical descriptions
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The CRA SR&ED Review Process
The Canadian Revenue Agency (CRA) validates all tax credit claims through a 2-step process procedure:
- First claims are processed and scanned for inconsistencies or errors
- Secondly Notices of Assessment are issued
Notices of Assessment may either:
- Reject a Claim or
- Request further review
Types of SR&ED Tax Credit
In the event that further information is requested, business can expect one of three review types:
- Desktop reviews are a manual read-through of all technical information.
- Financial Only
- Financial reviews are only concerned with financial documentation.
- Financial and Technical
- Financial and Technical Reviews are the most in depth because they delve into both into financial and technical aspects in addition to on-site interviews.
A CRA review can have a negative impact on the overall operation of your business, as it takes away precious resources and time to ensure your claims are valid. By using an SR&ED expert, you will be protected by any CRA reviews, as you will have a highly skilled and trained expert to defend all your claims.
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What Are R&D Tax Credits?
R&D tax credits are given by the Canadian government to encourage companies to undertake industry advancing projects that have financial risks. These Research and Development tax credits allow businesses of all sizes to advance technology, processes, or other aspects of one’s business, through a controlled and well documented program.
Are R&D Tax Credits Different From SRED Tax Credits?
R&D tax credits are the same as SR&ED tax credits, however R&D tax credits are the older name for the government program. Before 1986, businesses perceived the R&D tax credit program as a tax credit for businesses working in a lab environment making new scientific discoveries, when in fact this program was meant to keep Canadian businesses innovating from the very beginning. In 1986 the government changed the name of the program to “Scientific Research & Experimental Development”, which further allowed for clarity into the true purpose of the program. Oddly enough, many businesses today are still oblivious to the fact that their business may qualify for this government incentive program!
Why Are There So Few Businesses Using the SRED Program?
There are two answers to this question.
- There is still a misconception among many business owners and corporations about not fulfilling the criteria for a SRED claim.
- Business owners and corporations simply don’t know about the program.
Unless a business owner or a corporation gets in touch with a SRED consultant to discuss the possibility of putting together an SRED claim, they shouldn’t be speculating on the merits of their claim. Instead, they should contact a SRED consultant, get a complementary discovery session, and hear it from the professionals if they have a valid project for an SRED claim. This is the only want to know if your business or corporation is eligible for the tax credit program.
Another area of weakness in the industry is in the knowledge of business owners and corporations about the SRED tax credit program itself. Many educated professional simply do not know that this program exists, and that there are consultants that work strictly on contingency. This means no risk and full rewards for companies that are eligible for SRED credits.