The SR&ED program is an incentive program designed to
encourage R&D in Canada. The Canada Revenue Agency
(CRA) administers the program.
Each year, the CRA receives claims from over 11,000 companies
participating in the program. Of these, about 75% are small
companies whose claims for R&D expenditures generally range
from $20,000 to $2,000,000.
If your company qualifies, you could get back up to 35% of
your R&D costs, possibly helping to finance further projects and
improve your overall financial position.
Most provincial and territorial governments provide R&D
incentives, either separately or as part of the federal program.
For more information, visit www.cra.gc.ca/sred
and select “Provincial and Territorial Government R&D
Programs” under “R&D links”.
If you are a Canadian small business
that develops new or improved
materials, products, or processes in
Canada, you may be eligible to
receive refunds for SR&ED if:
■ you have to try to overcome one
or more technological problems;
■ you have to conduct trials,
experiments, or analyses to solve these
problems;
■ you required experience or technologies not commonly
available to your company to solve these problems; and
■ your work will result in a technological advancement. Even if
your attempts prove unsuccessful, you may still qualify.
You also have to demonstrate that the work was done. You can
use reports, models, prototypes, test results, logbooks, or
photographs to help support your claim.
You can claim many of the costs incurred for SR&ED during
your fiscal year. These costs may include:
■ wages for staff doing the SR&ED work
■ costs of materials used in performing SR&ED
■ costs of new machinery and equipment purchased for SR&ED
■ costs of SR&ED contracted out
■ lease costs (excluding building leases, or rent)
■ third-party payments to organizations such as universities and
colleges
■ certain overhead costs related to SR&ED, or a proxy for these
costs
Some work does not qualify, such as market research, research in
humanities or social sciences, quality control and work done
outside of Canada.
You can claim for projects undertaken and costs incurred during
your company’s fiscal year. If the work continues to qualify as
SR&ED in later years, you can claim for those years as well.
SRED Tax Credit Financing is a financial transaction through which a company sells its SRED tax credit (federal and provincial) to raise immediate cash. Instead of waiting for government reviewers to approve your claim, it allows you to access up to $1,000,000 quickly.
This facility is available to a qualifying company that has had an arm's length qualified third party prepare the relevant SRED claim. If the company has a successful track record of preparing and submitting its own SRED claims and recovering the tax credits, that company's claim may be considered for SRED Tax Credit Financing.
Up to 70% of the SRED Tax Credit Claim may be financed.
No. There have been no changes to the SR&ED program's policies or their application as a result of the new Form and Guide.
The SR&ED legislation and the program's application policies and other technical publications remain in force. This means that the program's eligibility and expenditure requirements remain the same. The technical publications should take precedence over the guide. The Guide is meant as an aid to completing the form.
A number of new tick boxes have been added to Version (08) of Form T661 that did not exist on previous versions, particularly in Parts 2 and 7 of the Form. The CRA added these tick boxes to the Form to assist claimants in providing as much pertinent information as possible to the CRA, the intent of which is to enhance the quality of claims received, and thus to expedite the processing and review of claims by the CRA.
Your claim will not be denied, nor will your projects or expenditures be disallowed because you did not tick a box or because you ticked a wrong box. If you neglect to tick the appropriate box when your claim is initially filed, you can provide the information to the CRA reviewer during the review of the claim even if the SR&ED reporting deadline (18-months after tax year end for corporations, 17.5 months for individuals) has expired.
*Exception:* You must tick one of the boxes at line 160 or 162 to select the traditional or proxy method.
For additional details on choosing the method to calculate SR&ED expenditures and on the SR&ED filing requirements, see the T4088, /Guide to Form T661/, Interpretation Bulletin IT-151R5 (Consolidated), /Scientific Research and Experimental Development Expenditures/, and Application Policy 2004-02R, /Filing Requirements for Claiming SR&ED/.
If a project is temporarily stopped but expected to resume at a future date, enter the date you expect the project to be completed at line 204. If you do not know the expected completion date, enter the date the project is temporarily stopped. Please refer to line 204 in the Guide (T4088) for further information.
Select the field of science or technology that best describes the primary field that the SR&ED project was attempting to advance. While a project may include activities in several fields, Form T661 requires you to identify one field of science or technology that relates to the overall objective of the project. You do not have to break down the project into subprojects for each field of science or technology.
Selecting the best overall code will be helpful in providing a focused response to the question at line 240 or 250 concerning advancement.
No. All claimants are required to complete Part 2 of Form T661. IRAP summaries, statements of work and progress reports may be helpful in completing Section B or C of Part 2 of Form T661 and could serve as useful documentation to support the claim in the event of a review.
No. The CRA will not disallow a project based on the quality or technical content of the narratives for these lines. Lines 240 to 252 are designed to encourage shorter and more direct responses to assist claimants in providing the information needed to meet the eligibility requirements. The information contained in the answers to Part 2 of Form T661 is intended for the CRA to carry out an initial review of the work that has been claimed. Clear and concise descriptions will allow the CRA to expedite the review and process the claim as quickly as possible.
If the narratives lack sufficient or pertinent technical detail, we will refer the claim to a CRA Research and Technology Advisor (RTA) for further review. Claimed work can only be considered ineligible after a detailed review by an RTA. A detailed review will usually involve a site visit and discussion with the claimant for further clarification and additional information. The claimant will have an opportunity to provide any further information that may be required by the CRA. The claimant will also be able to discuss recommendations on how to ensure that future narratives provide sufficient and pertinent technical detail within the word limits allowed. It is important that claimants address such recommendations in order to improve the quality of the project narratives on lines 240 to 252—to expedite the processing of future claims.
It is important to note that the CRA will disallow a project if no project details are provided on lines 240 to 252 by the reporting deadline. However, if the claimant files the SR&ED claim at least 90 days before the reporting deadline, the CRA will have sufficient time to review the claim and advise the claimant of any deficiencies in the claim before the reporting deadline. (Please refer to AP2004-02R, /Filing Requirements for Claiming SR&ED/.)