Many taxpayers wonder why they should use a scientific research and experimental development (SR&ED) consultant. Are they worth the money? Do they help or do you do all the work? Experienced SR&ED consultants can help you navigate the complex world of SR&ED and help you to maximize your SR&ED investment tax credit (ITC).
What is a SR&ED Consultant?
A SR&ED consultant is an expert in the area of SR&ED and helps individuals and companies fill out the SR&ED Schedule (T661) for their taxes. Some consultants will file the schedule for the taxpayer while others may provide the proper documents to the taxpayer and/or their accountant. SR&ED consultants may help with the technical or financial portion of the SR&ED claim and often they are able to assist with both portions. The Canada Revenue Agency (CRA) often releases updates to their programs, including the SR&ED program which is complex. SR&ED consultants stay informed of all updates from the CRA and able to relay the information to their clients. SR&ED consultants are skilled at identifying projects which meet the technical requirements and are versed in the wording the CRA prefers to avoid unnecessary red flags. They are also experienced in identifying SR&ED eligible expenditures and ensuring their clients are not submitting costs that do not meet the requirements of the program.
Should you use a SR&ED consultant?
When you require a specialist in another area of your business or personal life (doctor, dentist, accountant, etc.), you turn to a professional. It is easy for one to obtain a general knowledge of the SR&ED program from the CRA’s website, but to understand the nuances, verbiage, stay abreast of the administrative, policy, and legal nuances it’s often preferable to engage a professional.
Some of the reasons to use an experienced, specialized SR&ED consultant include:
- Almost 75% of SR&ED claimants are small businesses – most will not have in-house expertise.
- They are familiar with recent policy and administrative changes and what that means for the processing of your application
- Consultants will have seen a variety of claims submitted to the CRA and can guide you on how to communicate effectively with the CRA
- Many consultants keep a list of words to avoid in claims as they can be misconstrued and possibly flagged by the CRA
- Consultants can help identify expenses or eligible support work that a taxpayer may not have known was eligible, thus helping you to maximize your claim, while simultaneously developing the strongest submission possible
- Can help to ensure that work is not presented as routine engineering and that technological uncertainties are presented in the correct format. It is common for taxpayers to focus on their end results and not the underlying technology.
- Some consultants can help with training in your organization as well. There are SR&ED consultants who have training sessions for taxpayers to learn more about the program and how to ensure their company is following the policy guidelines while maximizing their return.
Is using a SR&ED Consultant a guarantee I won’t be selected for review (audit)?
Unfortunately, the answer is no. Similar to a lawyer or accountant, a SR&ED consultant cannot (and should not) guarantee that you will have your claim accepted without review. Using an experienced SR&ED consultant will help to reduce the risk of being selected for review and reduce the risk of reductions to your claim, as they will have helped you screen out issues the CRA may have otherwise identified. Many taxpayers choose to use a SR&ED consultant in case they are selected for a review (commonly referred to as an “audit”), as they “don’t know what they don’t know”. SR&ED reviews happen to SR&ED submissions just as they do with corporate taxes – sometimes there is a trigger, sometimes it’s a formality as it’s been several years.
SR&ED consultants can help taxpayers navigate the review process and defend their claims which can free the taxpayer to focus on their current tax year and work. SR&ED consultants also provide support by assisting the taxpayer in drafting their responses to the CRA and being present during the in-person or virtual review, to ensure a fair and impartial review of their work.
Why should you use a SR&ED consultant? The answer is to minimize your risks and maximize your return. A good SR&ED consultant is an expert at filing successful SR&ED claims and has a deep understanding of the policies (and politics!) which control the program. Hiring a SR&ED consultant is much like hiring an accountant for your taxes, a lawyer for a legal dispute, or a mechanic when your car needs work – they are the experts so that you do not have to become one, thereby freeing you to do what you do best: innovate.
Need help? Please see our page: SR&ED Consulting and Training for additional information on services provided.