Claiming SR&ED Tax Credits

Aimed at encouraging Canadian businesses of all kinds to conduct Research and Development (R&D), the Scientific Research and Experimental Development (SR&ED) Tax Credit is a federal tax incentive program. This program is administered by the Canada Revenue Agency (CRA), who ensures that it delivers tax incentives in a predictable, timely and consistent manner and encourages businesses to prepare their claims as per the required procedures by both the body as well as the Canadian tax laws.

In order to make an SR & ED claim, you must fill out Form T661 SR&ED Expenditures Claim. If you are a corporation, you will also need to fill out Form T2SCH31 – Investment Tax Credit – Corporations.  Individuals must also complete Form T2038 (IND) – Investment Tax Credit (Individuals). If anything is unclear and you would like to discuss with an SR&ED specialist, please contact Swanson Reed, who can advise you accordingly and ensure that you are provided with all the necessary information regarding the claiming of SR & ED tax credits.

In order to make a claim, you must have supporting documentation. If your SR&ED claim is subjected to review, you will be asked to show this documentation. If you do not have evidence of experimental activities, your claim will be disallowed and you may face penalties under subsection 163(2) of the Income Tax Act. Such documents include accounting records, invoices and even minutes of project meetings.

Applying for the SR&ED tax incentives requires that you file the applicable prescribed forms with your income tax return by your SR&ED reporting deadline. Normally, for corporations, the reporting deadline is 18 months from the end of the tax year in which you have incurred expenditure. Individuals have 17.5 months.