Changes to the Canada Revenue Agency’s (CRA’s) Self-Assessment and Learning Tool (SALT)

October 19, 2017 SRED

The CRA’s Self-Assessment and Learning Tool (SALT) provides claimants an estimate of the refund they are likely to receive under the SR&ED program.

The CRA updated its Self-Assessment and Learning Tool (SALT) in August 2017 to factor in recent changes to the provincial tax credit rates made in Manitoba, Ontario, Quebec and Saskatchewan.

SALT is a tool that helps SR&ED claimants understand the SR&ED program and calculate the Income Tax Credits (ITCs) that they can receive. The program is split into two standalone interactive PDF files that users can complete electronically after downloading them to their computer.¹

Step One (the first PDF) helps you estimate if there is SR&ED in the project you wish to claim for, and the PDF will generate a report that will tell you if the project is likely to be eligible or not. Step Two (the second PDF) allows you to calculate the ITCs you are entitled to receive and generates a second report. You can use both reports to help you prepare your SR&ED claim.²

The update affects how the rates are calculated in Step Two of the program. We have outlined the following changes that seem to have impacted SALT, but note that a senior call center agent at the CRA wasn’t able to specify whether or not they have, as all the information the CRA agent had on hand was updated in 2016 and was about the SALT tool in general, not the specific changes.

Changes to Tax Credits in Manitoba

The tax credit rate in the Manitoba Research and Development Tax Credit decreased earlier this year. According to the province, “The tax credit rate is 20% for eligible expenditures made before April 12, 2017, and 15% for eligible expenditures made after April 11, 2017.” ³ This change would appear to impact the ITC amount you would qualify for at the federal level.

Changes to Tax Credits in Ontario

The 2016 Ontario budget reduced the amount of ITCs that businesses could claim for SR&ED work from the province. The Ontario Research and Development Tax Credit was reduced on June 1, 2016, to 3.5% from 4.5%.⁴ Similarly, the Ontario Innovation Tax Credit was reduced at the same time from 10% to 8%.⁵

These reductions appear to boost the ITC amount you would qualify for from the federal government. However, the total amount of ITCs from the provincial and federal governments would be less than what you would have been able to claim before June 1, 2016, once the provincial reductions are factored in.

Changes to Tax Credits in Quebec

It appears that the most recent changes to Quebec’s R&D tax credit happened in 2014. At that time, the Quebec government introduced minimal eligible expenditure thresholds and a standardization of the tax credit rates. In most cases, R&D tax rates were reduced in December 2014.

Changes to Tax Credits in Saskatchewan

Saskatchewan unveiled changes to its R&D tax credit in their 2017 budget. According to the province: ⁶

Effective April 1, 2017, qualifying R&D expenditures by Saskatchewan Canadian-controlled private corporations (CCPCs) will be eligible for a 10 per cent refundable R&D tax credit for the first $1 million annual qualifying expenditures. Qualifying expenditures in excess of the annual limit, as well as qualifying expenditures by other corporations are eligible for a 10 per cent non-refundable R&D Tax Credit. In order to ensure sustainability, the total refundable and non-refundable R&D Tax Credits that may be claimed by a corporation will be limited to $1 million per year.

Conclusion

It seems as though the federal government was trying to save itself work by only making changes to SALT when enough provinces changed their tax credit programs. However, now when Step Two of SALT is completed, the estimated amount of ITCs you would qualify for are going to be as accurate as possible in the provinces listed above.

It is worth noting that seeking the advice of SR&ED or corporate tax experts regarding your SR&ED claim, and the amount you would qualify for may be beneficial, as it is not clear if the estimates provided by the Self-Assessment and Learning Tool are accurate.