As an innovator, your research project is core to everything you do. SR&ED is a great way to keep your research going and to stay competitive in the market. Here are three simple steps to make your research more SR&ED eligible:
1. Become familiar with the 5 questions.
Right from your project outset look at what you are trying to accomplish, how will this work fit into the 5 questions.
CRA now defines SR&ED as meeting the following criteria:
Was there a scientific or a technological uncertainty?
What aspect of your work is addressing something we don’t know? Did you have to think outside the box to find solutions? Has anyone done what you’re doing?
Did the effort involve formulating hypotheses specifically aimed at reducing or eliminating that uncertainty?
In order to claim SR&ED, you need a study question that hasn’t been asked and answered before and show how you think you can answer it.
Was the overall approach adopted consistent with a systematic investigation or search, including formulating and testing the hypotheses by means of experiment or analysis?
After developing the hypothesis, you must create a system to investigate and test the hypothesis through experiment or analysis. This stage may include the development of a prototype or testing sample data available to analyze the results.
Was the overall approach undertaken for the purpose of achieving a scientific or a technological advancement?
The past questions may have you fearing that you may need big progress or a working prototype to be eligible for SR&ED, but CRA allows claims for advancement that has not been reached yet.
Was a record of the hypotheses tested and the results kept as the work progressed?
As you continue through the process, you must keep records and results.
2. Tracking time and evidence
Make sure your claim is supported by proper documentation. Time and evidence tracking could make or break your claim. It isn’t a first priority for any regular business owner. CRA looks for more activity-based time tracking methods.
Failure to specifically provide activity-based time tracking when requested can lead to a determination by the CRA that a claimant’s records are not adequate. This is where Colum Consultants can help. Our expertise can help you track your time the correct way.
It helps tremendously if you also track your expenditures at the same time. Naturally generated information to support allocation of labor costs to SR&ED projects, coupled with other supporting documentation, should be sufficient. Time sheets that differentiate between SR&ED activities and non-SR&ED activities (whether by project or individual tasks) are also helpful supporting evidence.
3. Keep up to date on CRA releases and updates to the program.
One of the biggest help can be staying up-to-date on updates to the SR&ED program released by the CRA. How can you keep track?
The CRA releases the budget for the SR&ED program every year. Their standards of services and criteria for claims may change due to current events. Take for example Canada Emergency Response Benefit (CERB) and Canada Emergency Wage Subsidy (CEWS) and COVID support.
Sometimes innovators are not aware of the latest news regarding the SR&ED. Other times, even though they are aware, the overwhelming amount of information proves to be intimidating for them and they are unable to maximize their claim, but we can. Our expertise in SR&ED helps us navigate through many criteria and extract useful information that may fit your unique situation.