Why be a reactive Scientific Research and Experimental Development (SR&ED) claimant when you can be proactive SR&ED claimant? By reactive SR&ED claimant, I mean a business that waits until after year end to write and collect all information to complete a valid SR&ED claim. In these cases, the business often doesn’t know if any of the projects they have worked on throughout the year would qualify for SR&ED credits. It is at the end of the year that they start to discuss potential advancements they have seen and the obstacles they had to overcome. All of this of course relies on the memory of employees and management, and as we all know, memory can be faulty. This is why I urge all businesses to take a proactive approach to the collection, documentation and writing of SR&ED claims. There are a couple of ways to instigate a proactive approach; one approach would be to analyze every new project to determine if there are any potential technological advancements. Another approach is to have a periodic meeting between employees, management and any other influencers to determine if any technological advancements or obstacles have arisen. These meetings could be held quarterly, monthly or weekly depending on the type of business. The meetings do not need to be lengthy or highly detailed. The idea is to capture new advancements or obstacles that are occurring in the workplace and determine whether or not they could be considered an eligible SR&ED project. After the meetings, it would be ideal that an individual involved with a particular advancement or obstacle provides further documentation of the work to date. There are numerous benefits to proactive documentation including:
- Higher quality information (not relying on memory)
- Capture of more SR&ED projects
- Capture of more cost related to the projects
- Better documentation available if a CRA review is requested
- Ability to direct funds to qualifying projects
- Earlier completion of the technical report allowing for earlier filing
I know it is not always possible to document everything proactively but with a little bit of training, organization and effort any business could adopt a proactive system that would hopefully provide a more efficient and larger SR&ED claim.
Joshua Smith, CA
For more information about SR&ED tax credits, contact Joshua Smith by e-mail at: jsmith@welchllp.com or by phone at: 613.236.9191.