Starting the SR&ED claim preparation process early has many benefits. The most obvious is that earlier preparation leads to earlier submission and getting the tax refund sooner but there are other benefits as well. Even so, every year countless SR&ED claimants leave their claim preparation until the last minute.
The Consequences of Being Late CRA has published service standards that they try to meet based on the category that the claimant company falls under and when the SR&ED claim is submitted. CRA has committed to meeting these service standards at least 90% of the time. Ideally, the SR&ED claim should be filed with the initial tax return submission by the filing due date for the tax return (6 months after the fiscal year end) for the fastest processing. For Canadian Controlled Private Corporations (CCPC) with refundable claims (see our blog post here) a lower service standard applies when the SR&ED claim is filed as an amendment to the tax return. The difference in processing time is significant.
CRA’s SR&ED Service Standards:
• Refundable claims submitted with original tax return submission – 120 calendar days from receipt of a complete claim
• Refundable claims submitted as an amendment to the tax return (“claimant-requested adjustments”) – 240 calendar days from receipt of a complete claim
• Non-refundable claims whether timely filed or amendments – 365 calendar days from receipt of a complete claim
As a worst case scenario, there is also a deadline for filing a complete SR&ED claim after which no claim will be accepted by CRA. This is 12 months after the normal tax return due date, or 18 months after the fiscal year end.
The Benefits of Starting Early Obviously starting early creates a higher probability of submitting a claim with the initial tax return for the year. This leads to a faster service standard with CRA for refundable claims. On top of this, there are a number of other benefits:
• If an incomplete claim is inadvertently submitted, CRA will inform the claimant regarding the missing information. This generally happens within 30 to 60 days following receipt of the claim by CRA. Filing well ahead of the 18 month deadline gives a claimant an opportunity to act on this information before it’s too late. This is especially beneficial to claimants that prepare their own submissions.
• The earlier the better! At BeneFACT, we frequently submit complete claim packages to our clients within two to three months after their fiscal year end. This allows them to include the impact of the SR&ED in their final tax balance payment and potentially reduce next year’s tax instalment payments.
• Claims prepared closer to the time when the work happened are usually stronger and better supported. Documentation is easier to identify and find, and the technical personnel generally have an easier time articulating the technological aspects of their projects. Stronger and better supported SR&ED claims lead to easier reviews with CRA and more SR&ED tax credits in claimants’ hands sooner.
Although the benefits of preparing your SR&ED claim early are significant, the impact of being late could be catastrophic. The moral of the story? Be an early bird!
BeneFACT Consulting Group has a team of financial and technical experts dedicated exclusively to helping Canadian companies maximize their R&D refunds. Speak with a BeneFACT SR&ED expert today to learn more about the SR&ED program to see if your company’s activities qualify for this lucrative tax credit. Get the information you need to start maximizing your claim today! Toll Free: 1-855-TAX-BACK (829-2225)