The 2012 and 2013 federal budgets indicated that a number of changes were being considered for the SR&ED program, which could include revisions to the T661 submission forms. The CRA has now provided more hints as to what sort of changes they will be implementing.
This article was published on the CRA website a few days ago (2013-10-06): http://www.cra-arc.gc.ca/txcrdt/sred-rsde/whtsnw/msg-t661-2013rvsn-eng.html
There are two primary changes that have been announced:
Consolidation of Applied/Basic Research and Experimental Development in SR&ED Forms
In the current version of the T661, there are separate sections to describe the project work in Part 2. If a claimant is filing an Experimental Development claim, they complete Part B of the form, which consists of the standard:
- Line 240: Technological Advancements
- Line 242: Technological Uncertainties
- Line 244: Description of Work Performed/Systematic Work
If a claimant is filing for either an Applied or Basic Research claim (e.g. science for the sake of science), then they complete Part C of the T661, which only requires 2 sections:
- Line 250: Description of the scientific advancement/knowledge sought.
- Line 252: Description of the work performed during the tax year.
As such, Applied and Basic research claims did not require a description of the Technological Uncertainty – presumably, this was not previously required as the search for new knowledge was enough justification. The recent update states that these two sections will be merged together.
Altogether, this will have a minor impact on the claim filing process, considering >95% of all SR&ED claims are Experimental Development claims as opposed to AR/BR reports.
Updated Criteria – 5 Questions re: SR&ED eligibility
As we discussed in other posts, the CRA released an updated “Eligibility of Work for SR&ED Investment Tax Credits Policy“ back in December of 2012. It was indicated that 5 questions were now being used to define SR&ED, as per the precedent set in the Tax Court of Canada’s Northwest Hydraulics Case. The 5 questions are as follows:
- Was there a scientific or a technological uncertainty—an uncertainty that could not be removed by standard practice?
- Did the effort involve formulating hypotheses specifically aimed at reducing or eliminating that uncertainty?
- Was the adopted procedure consistent with the total discipline of the scientific method, including formulating, testing, and modifying the hypotheses?
- Did the process result in a scientific or a technological advancement?
- Was a record of the hypotheses tested and the results kept as the work progressed?
The CRA will now be officially introducing these criteria into the latest revision of the T661, and it is anticipated that all claimants will need to answer all questions to file successfully in the future.
Release Date for New SR&ED T661(13)
The updated Form, officially known as T661 (13) (revision code 1301), has not been released yet, and no official release date has been announced. That being said, it will become effective immediately upon release. Any claimants can continue using the current version of the T661 up until December 31, 2013, but they will no longer accept the old version after January 1, 2014.