The objective of SR&ED Tax Credits (Scientific Research and Experimental Development) program aims at encouraging research and development in Canada. The initiative of SRED is further motivated by the provision to make claims for expenses on eligible research and development work or project done in Canada. The submission of the claims is done using the T661 form. Canada Revenue Agency (CRA), which is the administrator of SR&ED Tax Credits incentive program, evaluates the eligibility of research and development work based on supporting evidence submitted by the claimant. The CRA has a dedicated document, T4088, which spells out the details on SRED expenditures claim. The T4088 is also a guide to completing the T661 form for claim submission.
SR&ED Tax Credits’ Guide (T4088)
The T4088 is a very important in tandem with the SR&ED Tax Credits program. It reflects any changes to the T661 claim form as well as other changes pertinent to the SRED policy. In the CRA’s T4088, it categorically specifies the importance of maintaining supporting evidence to substantiate the R&D work done and the allowable expenditures incurred. The supporting evidences can be in the form of documentation, information and records. The very essence of keeping supporting evidence for the claimed work done lies in the event that the claim is selected for review by the CRA. If there is absolutely no supporting evidence for the research and development work done, then it is highly unlikely that the claim will be approved. The supporting evidence also needs to be fairly thorough, contemporaneous and complete, especially in the event of an audit by the CRA. The critical issue at hand is the method or system used to keep and maintain acceptable supporting evidence so that the claim submission will go through smoothly.
SR&ED Tax Credits and Supporting Evidences
One option is the use of data tracking and work record software which could make life much easier as the R&D work progresses. Software for this purpose usually combines technical knowledge pertaining to research and development as well as the elements of accounting. As you can imagine, using the software will likely require some dedicated personnel and certain amount of time, training and human resources. However, specialized software is not the only option available. The supporting evidence can rightly be done manually. The format of the evidence is not the key here. The format can be documentation, information, record, or any combination thereof.
4W and SR&ED Tax Credits
The crucial element of the supporting evidence is a clear record of What work was done, When the work was done, Who performed the work, and Which expenditures were involved pertaining to the work done. The 4W rule in a nutshell summarizes what is needed to be considered acceptable supporting evidence. The problem of keeping proper supporting evidence will likely lie in the implementation of a system for keeping track of things. In order to overcome this problem, which is essentially a human factor, there must be dedicated personnel and/or dedicated team accountable for the proper and regular record keeping of matters related to the SRED work from planning stage until completion of the research and development. Completing the T661 claim form for SR&ED is not too complicated as spelled out in the T4088 document, though someone with the experience and specialization will expedite things much faster. Keeping acceptable supporting evidence for any SR&ED work eligible for claim submission is absolutely crucial. Kelid™ has developed customized templates for each industry for time tracking, project progress tracking, trial log and test log. Feel free to call us for Free 30Mins no-obligation consulting service. For further information for eligibility of your project and estimate your claim size check out Assessment LookUP and Fund Calculator. We also invite you to join our monthly news letter or follow us on Twitter, Linked-in, Facebook, orGoogle+.