The Scientific Research & Experimental Development (SR&ED) tax credit program is a much needed financial resource for many Canadian companies. Recently, changes in SR&ED policy and interpretation (or lack thereof) of the Income Tax Act has made it increasingly difficult for firms to see a return on their investment, with more claims getting reduced or completely rejected. Many companies whose SR&ED claims are negatively impacted do not know the process to appeal the decision and are left without recourse. These same firms are no longer motivated to file for SR&ED and hence miss out on opportunities for future SR&ED claims.
Consultants are a very powerful resource that can assist clients in maximizing their SR&ED refunds and defend a claim when it goes through a review. They also assist clients in preparing them to maintain contemporaneous documentation that may be required by the Canada Revenue Agency (CRA) as supporting evidence for a claim. Not all SR&ED consultants provide the same level of service, however, which is why it is important to do your due diligence when researching for the right SR&ED consulting firm.
First, you need to ensure that the consulting firm has several years of history assisting clients in claiming SR&ED. Find out whether they provide support during a review and if the rate is already included in their fees. Our experience has shown that not all consultants will assist in a SR&ED review and if they do, then the consultants may charge extra for this add-on service. In addition, enquire if the consulting firm handles only SR&ED as their core business or offers a banquet of services like grants, business advisory services, and more. If the firm takes on too many offerings, their services can be diluted and subject to a reduction in quality.
Second, ask the SR&ED firm for client references to validate their experience and expertise. If the consultants hesitate in providing you with references or suggest that providing references breaches their confidentiality agreement with the clients, then ask to see the agreement. This should in fact be a red flag to the potential client. There should not be any reason why the consultant cannot provide references, if they are a legitimate firm.
Third, enquire about the experiences and educations of their in-house consultants, and if the consultants are full-time or part-time with the firm. This will give you an idea if the firm is a small “mom & pop shop” operating from their basement office or are in fact an established, well-reputed firm. Either way, you want consultants with both SR&ED and industry expertise, as well as financial experts, working on your claim.
Finally, if the consulting firm supports their clients in reviews, ask them whether the same person that manages their claim also defends them in an audit or if they have a separate reviews team. It is critical to have a separate department that is focused solely on defending objections and claims in review, as the process can be radically different from filing a claim. The reviews department must ensure the overall success of the claim and be ready to issue a Notice of Objections and take the CRA to Tax Court of Canada, if necessary. On the other hand, having one or two people that are managing the claims from the write up to the review may not be able to dedicate enough focus when handing claims and reviews for half a dozen or more clients. There is a high probability that the quality of service can degrade.
BeneFACT is Canada’s largest independent SR&ED consulting firm. We are ISO 9001:2008 certified, and have over 60 full-time employees and 50 part-time contractors that support the overall SR&ED claim process. Our in-house consultants have B.A.SC, Masters and/or PhDs in the respective industries they service, with clients all across Canada. Our history of success is recognized by clients and government regulators alike. To learn more about how you can receive a higher SR&ED claim without the headache, call toll free: 1-855-TAX-BACK (829-2225).