There are many reasons a company might decide to do SR&ED internally. SR&ED was developed to reward Canadian companies for their innovative activities, and many people see it as an added bonus rather than a priority. Handing the job off to a financial person within the company seems like an easier way to do things, and maybe a way to save a couple bucks. But in the long run, is it really worth it?
Think filing your regular taxes is a headache? It doesn’t come close to the paperwork required for filing for SR&ED tax credits. Technical reports, costing, and documentation are all required to submit a claim.
If all the proverbial ducks aren’t in a row when a review rolls around, it can be an extremely frustrating and unpleasant experience. Even if paperwork is properly organized, the trouble may occur in the writing of the actual report. The CRA has very specific things they look out for and if the writer is not experienced in SR&ED, they may overlook or not fully understand every aspect of the report, resulting in delayed or lost benefits.
Determining what is SR&ED is half the battle
One of the major areas where businesses are missing out on possible SR&ED tax benefits is in the everyday occurrences that seem “routine.” Daily activities and even failures may be SR&ED eligible. When those activities are related to the big innovation picture, they are definitely eligible. Sometimes it takes an individual on the outside of the business looking in to truly see the things that often fall through the cracks.
Failure is a Scary Word
No one likes to fail, and when a project doesn’t work out the way it was intended it can be easier to chalk it up to an “experiment” and let it go. But there’s the magic word: Experiment. In the SR&ED world, it’s all about the attempt at innovation. It’s trying something new and pushing forward. And the rewards are there, even if the project didn’t work out in the end. However, you still have to figure out what part of the loss is SR&ED eligible.
The bottom line is this: Sure, you can file for SR&ED yourself, but can you really afford it? Are you willing to have big payouts overlooked and miss possible benefits you’re actually entitled to? And besides, you have better things to do – like running your business.
BeneFACT is Canada’s largest independent SR&ED consulting firm. Call us at 1-855-TAX-BACK (829-2225) to start collecting R&D tax credits today.