Why Work With an SR & ED Tax Consultant?   by Geoffrey Tarrance

in Finance / Taxes    (submitted 2011-03-27)

The SR & ED (Scientific Research and Experimental Development Program) Tax Program in Canada is among the biggest government-based programs in the world that support business. Just in 2010, the program paid out more than $4 million to grow research and development in Canada. The SR & ED Tax Program helps Canadian businesses compete globally.

The SR & ED Program is a federal program offering tax incentives to Canadian businesses that are involved in research and development with the goal of producing new technology and advancing the science of processing, materials, and products. The goal of the Canadian government is to grow more technology, have more innovation, and create new products.

The SR & ED Program was created to help companies, both big and small -- from corporations to startups, partnerships, and more. As long as the companies operate in Canada and the research meets the standards of the SR & ED Program, they can get a tax incentive of up to 35% of their expenditures and some overhead costs. The tax incentive can be in the form of a refund if enough tax is not owed.

The SR & ED Program is not that complicated but there are many long forms that need to be completed and a lot of confusing aspects and legal definitions. The type of research that is qualified can be difficult to understand so working with an SR & ED tax consultant is recommended.

The tax credits obtained through the SR&ED Tax Program can be applied to taxes three years back. A good SR&ED tax consultant can help you find work among your current projects that qualifies for these rebates. It is important that you keep good records on the projects your company does so you can increase your SR&ED tax benefits including:

1. Keeping track of all the SR&ED work you do and the related expenditures.

2. Categorizing all research and development work into individual projects.

3. Categorizing all costs and cross-allocating them to projects.

4. Creating a separate financial report for each project in the proper format.

5. Reporting all the information you have tracked in the proper format to the Canadian Revenue Agency (CRA).

The forms you will need to fill out for the CRA to qualify for the SR&ED tax credit are:

1. Summaries of technical information
2. Schedule 31
3. Schedule 32
4. Form T661

These forms must be completed every year at the financial year end and turned in after 18 months of the date. Since the forms that are required to be completed are so complex, it is important to work with a qualified SR & ED consultant who can help you get the most out of your tax rebate and also make sure that your paperwork is in order. Anytime you do research and development work, including producing new products, you need to talk to an SR & ED consultant.

About the Author

Evamax offers SR & ED consulting services, helping businesses in Canada to obtain Scientific Research & Experimental Development tax credits from the federal government and government of Ontario.