June 30 year end?  Start SR&ED Now!

2020-07-06 02:54 PM Comment(s) By Mike

Doing SR&ED properly takes time - don't leave it until tax season

Getting your SR&ED claim prepared properly doesn't have to take a heck of a lot of time, if you've got reasonable tracking systems in place.  But even so, it does take time.  The bulk of the effort usually falls on science/engineering staff to prepare the technical project descriptions required by CRA.  I've worked over the years with literally hundreds of companies doing everything from cancer research to artificial intelligence gaming engines, and have yet to meet a team that enjoyed doing SR&ED claims.  Most recognize the need, but it can be a big challenge in many cases to translate real-world R&D into CRA's SR&ED terminology.  That terminology is based ultimately on the Income Tax Act which, if you've never had the pleasure of reading it, is arguably written in neither of Canada's official languages.  Simply put, writing SR&ED project descriptions is not fun and most companies will push it back as long as possible - usually to their tax filing deadline.

That's a bad idea for any company, regardless of their tax filing deadline.  It's worse for companies with a June 30 year end that need to file their taxes (and SR&ED) by December 31.  Regardless of the industry mid-December is a popular time for project milestones, deadlines and deliveries.  Most of us are also looking forward to the holiday season and a well deserved break.  So it should be no surprise if science and engineering staff get a bit salty when pressed for SR&ED input at this time of year, and don't seem to be giving it their best effort.  That can result in poor quality SR&ED descriptions which, in my experience as a CRA SR&ED auditor, is the biggest single cause of SR&ED audit difficulties that Canadian taxpayers run into.  It can take years for a company to get back on track with CRA and SR&ED once that happens.

So get started early on preparing SR&ED, well ahead of your tax filing deadline.  For companies with a June 30 year end, now is a great time to start - while the facts are still relatively fresh in everyone's memory.  And consider bringing in an expert to help.  It's a real stretch to expect science and engineering personnel to be fluent with the Income Tax Act and CRA SR&ED terminology, and it's likely not the best use of their time in any case.  Skookum SR&ED can generally cut the time needed from your team down to only a few hours (spread out over a few weeks), so they can focus on what they do best.  We're here to help you succeed with SR&ED.

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