This post outlines some simple questions that will help an SR&ED neophyte examine existing projects with an eye for recapturing expenses using the SR&ED tax incentive program.
6 Questions for SR&ED Eligibility
Can you answer yes to any of these questions? (Note: Your project’s success is not a requirement for eligibility, which is why we’ve used the term “try” below in relation to achieving goals.)
- Are you developing new products or processes for your business that have an element of science or technology? (E.g. recipes involve chemistry, iPhone apps involve computer science.)
- Are you considered to be a knowledgeable authority in the specific area of science and technology, or did you engage the services of an expert?
- Even with pre-existing methods, processes, and information available to you, did you still have to experiment in order to try and achieve your goals?
- Were you unsure of a) if you could achieve your goals at all, or b) if you knew the best way of achieving these goals?
- Did the project require you to try several different approaches, with varying results? Were these documented?
- At the end of the project, had you advanced your organization’s understanding of the underlying science and technology?
If you answered “yes” to most of the above questions, then you owe it to your SR&ED project to learn more about the SR&ED program or even contact a qualified professional. Many firms offer a free consultation to determine if your work is eligible.
The CRA’s SR&ED Self-Assessment and Learning Tool (SALT)
The SALT consists of two PDF forms that generate reports once they have been completed. The PDFs rarely work in online PDF readers, so need to be downloaded (and even then they may not be compatible with your PDF viewer).
The first form consists of five parts with questions to determine your project’s eligibility, and the second “will […] help you estimate allowable expenditures associated with your work and the potentially claimable [Income Tax Credit (ITC)].”
The SALT is primarily aimed at small- and medium-sized businesses or anyone who is using the SR&ED program for the first time. It provides an excellent starting point for newcomers and is more accessible than reading the entire SR&ED section of the Income Tax Act.2
A Few Words of Caution Re: SR&ED Eligibility
Keep in mind that the SALT is for guidance only. The questions demand simplistic answers and do not take into account industry-specific circumstances which can affect your claim.
If you are uncertain about a project, especially if you are making your first SR&ED tax claim, consider speaking with a consultant or tax credit coach. You may be offered an initial assessment over the phone so you can decide if it is worth your time to prepare the full SR&ED claim.
Unsure if you are SR&ED eligible? Contact us directly
- Government of Canada. (August 11, 2017.) SR&ED Self-Assessment and Learning Tool. (Accessed: August 18, 2017.) Retrieved from: https://www.canada.ca/en/revenue-agency/services/scientific-research-experimental-development-tax-incentive-program/self-assessment-learning-tool.html. ↩
- Government of Canada. (August 1, 2017.) Justice Laws Website: Search SR&ED. (Accessed: August 18, 2017.) Retrieved from: http://laws-lois.justice.gc.ca/Search/Search.aspx?txtS3archA11=SR%26ED&txtT1tl3=%22Income+Tax+Act%22&h1ts0n1y=0&ddC0nt3ntTyp3=Acts. ↩