AN INTERESTING OPINION FROM BDO ON NEW APPROACHES TO REVENUE CANADA’S SR&ED PROGRAMS
BDO points out that Revenue Canada has recently reviewed some of its audit practices for refundable tax credit claims
R&D Capital would like to provide you with a brief commentary recently issued by the firm BDO on the Canada Revenue Agency’s (CRA) to the Scientific Research and Experimental Development Tax Incentive Program (SR&ED). As you will see, there have been some changes in the audit processes that may impact the eligibility of some of your expenses under the SR&ED programs. We believe this is information that will be useful to you and may make it easier to claim your tax credits.
BDO Opinion on CRA’s New Approaches to SR&ED
BDO provides an update on the administration of the SR&ED programs based on our daily experiences with the CRA.
Recently, the CRA abandoned its audit approach of verifying the answers to the 5 questions required to qualify a project under the SR&ED program. This change in the audit approach was presumably intended to facilitate claims to the tax authorities. Paradoxically, we have seen a significant increase in technical audits for some time.
In addition, the CRA is taking a greater interest in certain expenses such as the reasonableness of salaries claimed in relation to research and development activities through an exhaustive review of time sheets.
For the record, case law established since 2015 requires the presence of timesheets which would be the only evidentiary way to justify eligible activities for the program. Thus, it has been brought to our attention that audited files where a simple time estimate is used may trigger a review of the credits claimed. This results in a high risk that a significant portion of the credit will be denied, leaving the taxpayer with an enormous burden of proof.
In conclusion, we recommend that our clients review their R&D compilation processes to adapt to the new CRA trends.
About R&D Capital
R&D Capital offers companies advantageous financing services for their refundable tax credits, whether for multimedia, scientific research and experimental development (SR&ED) or e-business development (EBD). The company also funds several types of federal and provincial grants. Headquartered in Montreal, R&D Capital is known for its quick turnaround time, flexible financing solutions and simplicity of process for its clients.
To find out about the various financing options offered by R&D Capital, you can contact us by e-mail at info@rdcapital.ca or at (416) 575-0403.