On Tuesday, November 19 2013, the Canada Revenue Agency (CRA) held a general information seminar on the Scientific Research & Experimental Development (SR&ED) tax credit. The goal of these seminars is to “provide a general overview of the program, explaining the program’s eligibility criteria, what expenditures are eligible, and how to file a SR&ED claim.” What did we learn by attending? Here are three lessons we took away from the CRA’s presenters that morning.
The Importance of the Five Questions
The new T661(13) solidified this, but one thing was very clear at the seminar: the five questions are essential for determining SR&ED eligibility.
To recap, here are the five questions and how they relate to the previously employed three criteria used to prove work is eligible for a SR&ED tax credit.
Comparing the 5 questions to the 3 criteria. (Information courtesy of The Comprehensive Guide to SR&ED)
The presenter spoke at length about the five questions in a section entitled “Step 1 – Determine if there is SR&ED.” Not only do Research and Technology Advisors (RTAs) use these questions to guide its decisions, but it’s the first aspect of a claim they examine. Ensuring that the technical narrative addresses these questions and has the documentation to back up each statement is absolutely essential to filing a successful SR&ED claim.
Lenient on First-Time Claimants?
An interesting tidbit of information that came out from the next presenter was that the CRA is purposefully lenient on first-time claimants. The speaker said that as they understand someone claiming SR&ED for the first time won’t have as strong a handle on the program, reviewers will be less stingy about the finer details.
But is this true? Not having claimed SR&ED before is viewed as a red flag when a file comes to the CRA; first-time claimants are very often selected for a review. Having successfully submitted a past claim often lessens the possibility of having an RTA knocking on your door.
While the CRA doesn’t have any data to prove this assertion one way or another, it’s very interesting to note that leniency on first-time claimants is an attribute the CRA would like to exude, perhaps to attract newcomers to the program.
The CRA Wants You to Apply for IRAP
Perhaps the most surprising aspect of the SR&ED general information seminar was that a third of it wasn’t on SR&ED at all; rather, the final hour was taken up by a representative from the Industrial Research Assistance Program (IRAP) who spoke to attendees about how to apply.
Last month’s Speech from the Throne subtly indicated that the government is pushing IRAP over SR&ED; sitting through a talk from an Industrial Technology Advisor (ITA) extolling the virtues of IRAP during a seminar supposedly dedicated to helping businesses understand SR&ED didn’t quell that concern. It’s unnerving to know the government is throwing its support behind a $110 million program that helps ~1,000 small businesses per year rather than a $3.6 billion program that helps ~20,000 small businesses per year.