 |
            |
| Feature Story | ||
| Making the most of SR&ED opportunities: | ||
| Ten tips for SR&ED planning | By Peggy (Mooney) Aulenback | |
| Last-minute preparation of an SR&ED
claim is a common situation. Even though SR&ED tax credits/refunds can
reduce the cost of research and development by 35% and as much as 57.75% on
wages to salaried employees, too many companies spend too little time planning
for their claims. Claims are processed on the highest priority basis when they are filed "currently," that is, with a corporation's current tax filing. For most companies the tax return is due within six months of the fiscal year end. Claims filed as a "taxpayer request for amendment" (TPR) are given the lowest priority, and often take several additional months to be processed. (TPRs are claims filed after the corporation's tax return has been assessed.) By filing the SR&ED application after the return has been assessed the taxpayer is requesting an amendment to the original tax return. Plan ahead! So, how do we plan ahead and make the SR&ED claiming process easier at the end of the fiscal period? Here are ten tips: 1. When you begin a project, conduct an evaluation to determine if it meets the three criteria of the Scientific Research and Experimental Development (SR&ED) program. These are technological advancement, technological uncertainty, and content (experimental process with a documentation trail). If you are unable to make this determination in-house you should contact your tax advisor or a company that specializes in SR&ED claims. This evaluation will assist you in determining whether the project qualifies and if steps need to be taken to prepare for an SR&ED claim at the end of the fiscal period. 2. Make sure development staff have an understanding of eligible activities. Consider attending Canada Revenue Agency (CRA) seminars, reading the CRA guide, or calling in a specialist to go over the criteria with the development staff. |
3. Develop an SR&ED project plan.
Write down the advances you expect to make, how you plan to approach the
development and the options you might try if the first and most desirable route
fails. Then make SR&ED an agenda item for all development meetings. Update
the activities each meeting. Keep minutes. 4. Keep all prototypes, archived versions of software, plans, drawings, engineer's or developer's notes—however informal—in an SR&ED file. 5. Write down the state-of-the-art of the technology at the time of your project. Include references such as suppliers contacted, industry associations, Internet sites checked, experts consulted, trade magazines, libraries, etc. 6. Make sure your personnel account for time they spend on various activities. Break out that time to differentiate that time between product development and SR&ED time. Accounting for employee time can serve other company needs as well. 7. Note the issues that cause problems, concerns or difficulty in your development work. List any alternatives available to resolve them. Save these notes. 8. Keep track of when each project begins and finishes. Then, also note SR&ED start and finish dates within the project. Not all development activities are eligible within the CRCA program. For instance, standard product development activities are outside the SR&ED claim. 9. If your accounting system permits, set up an SR&ED account. Code all purchases and allocate portions of salaries from the time sheets to this account on an ongoing basis. Copy invoices to your SR&ED file. 10. Remember that for Canadian controlled private corporations (CCPC) this could be a 35% or 58% investment (57.75% on salaried wages eligible for the proxy). |
 "Develop an SR&ED project plan. Write down the advances you expect to make, how you plan to approach the development and the options you might try if the first and most desirable route fails. Then make SR&ED an agenda item for all development meetings. Update the activities each meeting. Keep minutes." Peggy Mooney is President of Iwasan Consulting, a Surrey-based BC TIA member company specializing in SR&ED claim preparation and management. Contact her at pmooney@iwasan.com. Iwasan's Web site is www.iwasan.com. Printed in the BC TIA Monitor, July/August 2000 |
This site requires a Java-enabled browser best viewed 800x600 CE