| • Who is
eligible? |
A
project is eligible if:
- You
learned something new.
- It
was a challenge without a known solution.
- You
had to try a few different things.
Technically ~ To be eligible, a corporation must satisfy three key criteria as
part of their R&D process:
- Technological advancement - The advancement does not have to be a
huge breakthrough or quantum leap in your industry and does not have to be
successful. It can be as simple as an incremental improvement on the shop floor
as long as you are attempting to increase your base level of knowledge in your
technology. Your competitors may already be doing the same but may not be
showing or sharing the knowledge.
- Technological uncertainty - Your company encountered a technical
problem without apparent solutions that can be found in the public
domain.
- Systematic investigation - You must be using an experimental process
to solve the problem.
|
| • What
expenditures are eligible, and how much can I get
back? |
T4
wages 43-73%
Materials and contractors 35-48%
Most R&D
project-related expenditures are eligible including:
- Salaries, wages and subcontract work – usually the largest
expense of any claim
- Overhead
- Wasted materials
- Capital equipment for experimental use
- Prototypes and testing equipment
|
| • What is experimental
development? |
Learning something new.
Experimental development refers to a
process through which companies are increasing their knowledge base in a field
of technology by developing new products, prototypes or manufacturing
techniques.
|
| • What does the refund
submission include? |
Tax
forms
Technical report
Project costing
An application for a
SR&ED refund must include:
- a
technical report detailing the development work performed
-
financial schedules which are included with the tax return
The most critical part of the submission is the technical report.
Qualifying claims can be rejected simply because of the quality of the
technical report. CRA wont spend time searching for the merits of a project;
they must be clearly stated in the original submission or a claim loses
creditability and may be cancelled.
|
| • Do we need detailed
information to claim? |
NO
Generally, CRA will allow claims with less than ideal
documentation for first time claimants. Recently the focus within CRA has been
placed upon documenting the development process. Documentation required for an
SR&ED claim includes records that separate the costs applicable to
SR&ED from other project expenses. Also, project plans and activity reports
for the work done on the project in the fiscal period are ideal documents to
support a claim.
Paramount can assist your company in creating a
documentation trail. Projects should be documented from the earliest point
possible in the project. It is therefore essential to start documenting when
the project is in the discussion stages. Although for current projects,
creating documentation at any point in the project is recommended.
|
| • Will our company be
audited? |
NO
There will not be a general audit of your company. CRAs
policy is to review only the expenses on the R&D claim. A financial
reviewer may visit you, particularly if this is your first claim, to verify the
expenses claimed. The science reviewer may also visit to gather more
information or to clarify the technical aspects of the claim. Generally a
companys claims are reviewed once every 4 years. Using Paramounts claim
preparation services will reduce your chance of being reviewed. Paramount
claims reviewed are 1 out of 15.
|
| • Why hasn’t our
accountant made us aware of the program? |
We
specialize in SRED, many accountants and firms do not.
Other than large
accounting firms, accountants often specialize in corporate tax planning and
year end statements.
Unlike most accountants, Paramount specializes in
one segment of the Income Tax Act. SR&ED claims are our business. This area
is so specialized that CRA has a team of financial reviewers who deal
exclusively with SR&ED claims. In addition, they hire industry specialists
with standings in various areas of science to review the technical reports.
Paramount also uses industry experts with similar qualifications to determine
if projects qualify and to prepare the reports. We match science to scientist,
just as CRA does.
|
| • Will Paramount handle
CRA inquiries for us? |
YES
Tracking the claim, making arrangements with reviewers and
communicating with CRA in respect of your claim, is all handled by your
Paramount consultant throughout the claim process.
|
| • Do I receive a refund
cheque? Is it taxable? |
Small private Canadian companies – yes and yes
Large &
foreign corporations tax credit and yes when used
Small Canadian
private corporations receive a refundable tax credit and yes, it is considered
income. Large and foreign corporations receive a credit against taxes payable
and is also considered income.
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