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Scientific Research and Experimental Development

The Scientific Research and Experimental Development ( SR&ED ) Program is a federal tax incentive program available to all size businesses in all sectors of business.

Businesses can apply for SR&ED investment tax credits for expenditures such as wages, materials, machinery, equipment, some overhead and SR&ED contracts.

This is a very effective program which can give to the tax payer large cash tax credits for the research work performed. The application process can be detailed and trying at times but there is a large economic reward if applied for properly.

The process for application for “ SR&ED” tax credits is in two parts.

Part One is the Scientific Report.

This report must answer the following questions:

What technical advancements were you trying to make ?

What technology obstacles/uncertainties did you have to overcome to achieve the technological advancements you have identified ?

What work did you perform in the tax year to overcome the obstacles identified.

Part Two is the Corporate Tax return application.

You must complete form T661 Scientific Research and Experimental Development Expenditure claim and S60 the Project Information return.

All of this information is sent in with your T2 Corporate Tax return.

The SR&ED Tax Credit audit.

Canada Revenue will process your return and application. This should take about 6 to 8 weeks. At some point they will send two representatives to your place of work to interview you. One representative will be the science expert and his or her job is to determine the validity of the experimentation. These are usually well educated people with expertise in the area that your claim covers. The other person will be the numbers auditor. This auditor will be an accountant and will want to verify the information provided on the claims forms in your corporate tax return. These CRA representatives will not want to look at any other part of your business.