How using a SR&ED consultant can benefit you
There are several reasons why companies often choose to do SR&ED internally. SR&ED aims at rewarding Canadian companies for innovative activities, and many don’t see it as a priority, but rather as an added bonus. Having a financial person handle the job within the company appears to be an easy way to do things, and this route will also save some money. Is it however really worth it in the long run?
- SR&ED Guidelines The SR&ED program’s guidelines are extremely complex. They are in fact more complicated than what filing business taxes is, as there is not nearly as much paperwork needed for filing taxes as there is for SR&ED tax credits. When submitting a claim, a company has to include costing, technical reports, and supporting documentation. If this paperwork is not organized properly when a claim is reviewed or if specific details are omitted from the SR&ED report, this could result in benefits being delayed or completely lost. Even when paperwork is organized properly, there may be issues with the writing of the report. The CRA has very specific requirements and if the report writer does not fully understand every aspect of the SR&ED report, this may result in lost or delayed claims.
- Maximize Benefits Determining exactly what activities and failures are eligible for SR&ED can be a daunting task. Routine actions and everyday activities may seem like they don’t meet the SR&ED program’s parameters, and many businesses therefore don’t take advantage of the substantial tax benefits. SR&ED consultants have the experience and expertise needed to be aware of the types of activities that will meet these parameters. Product development cost is by no means the only item that may be eligible. Companies can also claim for activities such as process development, software development and other supporting activities.
- Redefining Failure The reality is that businesses often fail to achieve their goals when implementing projects. This simply means that the whole scenario needs to be re-evaluated. Rather than referring to such actions as a failure, they should rather be referred to as an experiment. This change in perception makes all the difference when evaluating whether the company’s projects qualify for SR&ED benefits. Experiments are by nature innovative actions aimed at bringing about change. It is the act of attempting something new which is important, although the results may not be what the company expected them to be. An SR&ED consultant will be able to determine which aspects qualify as a loss for SR&ED benefits.
- Reduce CRA Audit Risks Experienced SR&ED consultants understand the allowable claim amounts and eligibility criteria fully, and will ensure that CRA audits aren’t triggered by claiming for activities that do not qualify or by overclaiming.
- Improved Relationship with the CRA Self-filing companies will often assume that CRA personnel are at fault or incompetent when there are issues with SR&ED claims. There are however normally valid reasons for claim rejections or audits (e.g., items claimed that were not eligible). Experienced SR&ED consultants are able to avoid problematic scenarios. This will prevent audits and give claims a much higher probability of success, which will in turn reduce conflict and stress with CRA.
Summary
Companies don’t have to partner with SR&ED consultants to utilize the program’s benefits. Doing so, however, not only enables the business to focus on running the business successfully, but also sets it up to receive bigger payouts.
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