The SR&ED Tax Credit program is the single largest source of R&D funding in Canada: over $3 billion in tax incentives are distributed annually 1. The program supports Canadian businesses by encouraging industrial research and development. Administered by the Canada Revenue Agency, SR&ED claims must follow certain guidelines and of course, be submitted well within the applicable deadlines. Failure to complete the claim forms in a timely manner can result in claims being denied and as a consequence, a loss of funds.
In this article, we explain what is meant by a filing deadline, what those dates are for individuals and corporations, and whether an extension can be received.
What is the CRA SR&ED filing deadline?
A “filing deadline” is the date by which the completed application and all the prescribed information must be filed with the Canada Revenue Agency.
This deadline differs for businesses and individuals:
Corporations: 18 months (from the fiscal year-end)
For corporations, SR&ED ITC application forms must be submitted with your corporate tax return, either by the corporate tax filing deadline (six months after your fiscal year-end) or – if filing an amendment – no later than 18 months from the end of the tax year in which the expenditures were incurred.
For example, if your business had expenses from April 2017 that you believe are eligible and your fiscal year-end is December 31st, you can either file with your corporate taxes by June 30, 2018, or file an amendment as late as June 30th, 2019.
Individuals: 17.5 months (from the calendar year-end)
Using the same start date, an individual should file when their personal income taxes are due (generally April 30th, but if you are filing SR&ED you are likely self-employed, so the deadline is June 15th) or, if you are filing an amendment, you have until June 15, 2019. If you do not send in the appropriate forms by the deadline you will become ineligible for an SR&ED credit and will lose the ability to reduce your income.
Pro tip: if you are filing your return close to the deadline, carefully document how you submitted the return either by photographing it being dropped in a dropbox, mailbox, office, etc. or otherwise keep a record that it was submitted on time. The CRA is a large organization and files have been known to get lost.
I’m getting close to the SR&ED filing deadline, can I ask for an extension?
While there are some exceptions that allow for an extension if you are filing with your original corporate or personal income tax return (i.e., if the government will owe you a refund), the 17.5 and 18-month deadlines for SR&ED are non-negotiable and inflexible. Applicants are encouraged to apply well before the deadline to avoid any processing issues. For due dates and required documentation, it is always best to consult the Canada Revenue Agency directly.
Are you sure I can’t get an extension? I have a very good reason for missing the deadline.
You can try, but it’s very unlikely. Extremely unlikely, actually – and may cost you a considerable amount in legal fees.
Let’s look at the example of Greenpipe Industries. In the late 1990s, the company was developing software on behalf of a larger organization. Thinking it belonged to the larger corporation, the smaller company did not attempt to claim associated SR&ED expenditures; however, when ownership was clarified the smaller company attempted to file an SR&ED claim for their work. Unfortunately, the expenditures for all three years were denied, as they were past the 18-month deadline. The applicant disagreed with this assessment and took his petition up to Federal Court, where it was also rejected, as the judge deemed that the CRA had followed protocol and there was no reason to allow the submission of SR&ED expenditures after the 18-month deadline. (Read our detailed summary regarding this case.)
A more recent example from 2005 illustrates the need to ensure all paperwork and forms are correctly filed. Dorothea Knitting Mills submitted the T661 on time but did not submit the supporting documentation until three months post-deadline.
[ 5 ] In this case, Dorothea filed the Form T661 within the 18 month period, seeking a tax credit in the amount of $566,495.50. Dorothea did not, however, file the requisite supporting technical information within the specified period. The technical information was not filed with the CRA until some three months after the filing deadline.
Don’t let this happen to your organization. Look into the program requirements, check your deadlines, and carefully monitor your timelines when it comes to submitting your SR&ED claim.
- Government of Canada. (2015, April 7). Evolution of the SR&ED Program Retrieved April 4, 2019, from https://www.canada.ca/en/revenue-agency/services/scientific-research-experimental-development-tax-incentive-program/evolution-program-a-historical-perspective.html ↩
- CanLii. (2005, March 4). Dorothea Knitting Mills Ltd. v. Canada (Minister of National Revenue) Retrieved April 9, 2019, from: https://www.canlii.org/en/ca/fct/doc/2005/2005fc318/2005fc318.html?searchUrlHash=AAAAAQAXZG9yb3RoZWEga25pdHRpbmcgbWlsbHMAAAAAAQ&resultIndex=2.. ↩