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Experiences at CRA Information Seminars (Part 2 of 2)

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Experiences at CRA Information Seminars (Part 2 of 2)
CRA Financial Information Seminars: useful, but not for SR&ED financial amateurs

Throughout the year, the CRA offers a number of educational seminars in which they provide information about Canada’s SR&ED program. The CRA information seminars take place in metropolitan centres across the country and are completely free and open to all interested members of the public/private sector. The CRA posts a schedule of these events on their website here.  

While the last post focused on the CRA’s SR&ED ‘General Information Seminar‘, this post will focus on the ‘Financial Information Seminar‘, which is designed as a more targeted experience for attendees. Unlike the General Information Seminar, this presentation focused the entire 3 hours on financial considerations in SR&ED claims. This post will provide an overview of what to expect from these events, as well as my own recommendations for anyone considering attending a future event.

Introduction & Services

The presentation started with a brief overview of the program, as well as a re-iteration of the various programs that the SR&ED office offers as a free service to Canadians.  These include the Pre-Claim Project Review (PCPR), the Account Executive (AE) program, and First-Time Claimant Services. These programs are all quite helpful, and can be read about in greater detail in part one of this post. The initial 15 minutes was taken up by this program overview, though it was generally useful information.

Tip: You can learn more about these CRA services by consulting pages 15 – 16 of the CRA’s Overview of the SR&ED Tax Incentive Program guide.

One interesting thing that I noticed about this presentation was the inclusion of a specific slide that was glossed over in the General Information Seminar. The slide  emphasized the view that SR&ED is an Incentive Program, designed to foster the following:

  • SR&ED work in Canada,
  • technologically new and improved products and processes, 
  • cost competitiveness, and 
  • expanded markets.

I thought the economic slant was an interesting note, especially since economic reasons are very often a key motivator for conducting SR&ED work.

Another interesting discussion arose when the project review process was brought up. The speaker, a financial reviewer, mentioned that there are a number of red flag activities that increase the chances of a particular claim being reviewed from a financial standpoint (i.e. independent of the technical review).  In particular he mentioned the following:

  1. More than 3 years since your last review,
  2. Having a previously adjusted claim,
  3. The owner being the only SR&ED employee, especially if they do not have a technical background, and
  4. Shorter reporting period (e.g. the project only takes a very brief period of time, but incurs large expenses during that period).

For many of these, there is not much that can be done. However, knowing that these factors exist allows a company to know, ahead of time, when a review is more likely to happen.

Federal T661 Financial Considerations

The second portion of the talk was given by a senior Financial Reviewer at the CRA. During his talk, he gave an excellent and very informative overview of the various categories that companies fall into, as well as an overview of how the SR&ED credit is calculated. This portion of the talk was excellent and clear, offering valuable information for any newcomer to the program. Although some of his explanations would only apply to large multimillion dollar companies (i.e. who spend $3,000,000+ in R&D alone per year), this information is useful for any company who will eventually grow to that size. There were some important but easy-to-miss points made during the presentation that people new to the program often overlook:

  • For companies who report more than $500,000 in aggregate federal taxable income OR companies whose taxable capital is $25,000,000+, the amount of money that can be claimed for SR&ED will ‘grind down’ more and more each year until they cannot claim for SR&ED. This is achieved by reducing the cap on how many eligible expenditures can be claimed every year (it’s $3,000,000 for companies otherwise).
  • All expenditures which are claimed under the SR&ED can be deducted against the net income during the year OR carried forward indefinitely, and deducted when necessary. SR&ED expenditures never expire.
  • When calculating eligible salaries, Specified Employees (i.e. Employees who own 10%+ of the company stock) are treated slightly differently. For the purposes of SR&ED:
    1. Their base salary has a maximum of 2.5 times the annual Year’s Maximum Pensionable Earnings (YMPE) which was $48,300 in 2011,
    2. For the purposes of calculating the Proxy Amount (i.e. overhead costs), only 75% of their time can be used for the Proxy Calculation. Thus, a specified employee paying himself $120,750/yr will see no greater benefit from SR&ED than someone making $500,000/yr.

Ontario R&D Tax Credits

After providing a discussion regarding the federal tax credits, the presenter launched into an overview of how Ontario handles its contribution to the program. To summarize, he explained that there are two different credits that companies can take advantage of. There is the Ontario Innovation Tax Credit (OITC) and the Ontario Research and Development Tax Credit (ORDTC). We’ll be providing a separate post regarding these two credits in the future, but for now, it is suffice to say that the OITC is worth 10% and is refundable and the ORDTC is 4.5% and is non-refundable. There are no special requirements for either of these programs (you automatically receive the credit if the federal SR&ED application is provided). However, you MUST FILE A SCHEDULE 5 WITH YOUR TAXES.  That is one requirement that the presenter reiterated several times. No Schedule 5, no 10% top-up from the Ontario government.

Tax Example

After a brief break, the session reconvened and the entire second half of the seminar was devoted to working through a single case example, from start to finish. Copies of all the major Federal Schedules were provided, and the CRA explained how to go about evaluating a claim and filing the taxes. This section, for me, was the most interesting portion of the seminar, but also its greatest disappointment. It was great to see how everything fit together, especially with regards to government assistance since so many companies obtain IRAP grants or similar programs. However, the delivery was lacking.

This was due to two primary reasons: First of all, the handouts provided were from an older version and some of the numbers provided were actually incorrect. Handwritten whiteboard numbers corrected these, but they were not always explained very well and I found the whole process very confusing. This was compounded by the fact that the presenters were attempting to present two different case scenarios, one in which the company would be profitable (and thus would benefit from the ORDTC), and one in which it was not (i.e. it would actually be hurt by claiming the ORDTC). Buried within this whole process is a good presentation and example scenario, but it was not presented effectively at this particular seminar.

It was also very helpful (to a person like myself with an engineering background) to go through the financial forms in detail and point out which lines on the tax returns were relevant to the SR&ED process. In addition, all presenters were very helpful in answering questions, especially regarding niche areas that are company-specific. For example, one thing that I was unsure about was where software licenses fit under SR&ED.  Discussing the issue with one of the presenters, he explained that while it could fall into several areas, the CRA is now treating all software license expenditures as capital items.

The presenter did acknowledge that the presentation was being changed every few months to account for feedback, and future presentations will likely be a lot cleaner. Nevertheless, the current presentation, with missing/wrong numbers made it very confusing to follow, especially since the various steps were covered at a very brisk pace.


Overall, the seminar was informative but was targeted at a very specific audience.  The description of the seminar itself states that it is designed for financial or accounting staff already familiar with the basics of the SR&ED program.  The presenters are very open to questions, but it is not a hand-holding session.

The unfortunate bottom line is that if you show-up with little or no tax experience, it will not be beneficial to attend.  However, if you’ve passed through the SR&ED gauntlet before, CRA information seminars provide a valuable touch-up on some outlying cases.  It is also a valuable time to meet face-to-face with the financial reviewer who may be looking over your claim in the upcoming years.

Have you ever attended CRA SR&ED information seminars? Did you find it helpful? Let us know! 

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