.png)
.png)
.png)
Business owners across Canada are hard at work seeking funding to bolster their capital stacks to stay competitive and keep projects rolling. The Scientific Research and Experimental Development (SR&ED) program is a valuable resource for Canadian businesses engaged in R&D, and knowing how to file a claim successfully is essential to maximizing your refund. Proving that your claimed expenses are both eligible and documented accurately is crucial to making the most of the SR&ED program and avoiding a CRA review, which can delay your refund.
Below, we’ll take a look at 5 ways to prove the validity of your claimed SR&ED expenses, as well as the benefits of working with Easly to get an advance on your earned credits. Read on to learn more.
Why Accuracy Matters
While there are many common mistakes companies make when filing an SR&ED claim, failing to justify your expenses (or missing eligible expenses altogether) can be particularly detrimental. Proper documentation (more on that later), as well as a strong understanding of what is and isn’t eligible, is crucial when it comes to ensuring you get the refund you deserve. For those who may be filing for the first time or who have had their operations change significantly since they first filed, working with an external consultant who specializes in SR&ED can be beneficial. Key elements that help to lend validity to your claimed expenses include:
1. Project Documentation
Proper documentation is one of the most important parts of your SR&ED filing. In order to have your claims accepted, you need to ensure that every aspect of your documentation is as clearly detailed as possible. This means that you should outline your project plans as thoroughly as you can and detail your objectives, methodologies and any modifications you intend to or have had to make throughout the project’s lifecycle.
By maintaining clear and thorough documentation, you provide a narrative that establishes the nature and scope of the research and development (R&D) work undertaken, which helps to avoid confusion and the potential of expenditures being denied.
2. Time Tracking and Employee Records
Overhead and other hard costs like materials aren’t the only things you can claim under SR&ED guidelines. Accurate time tracking and maintaining detailed employee and contractor records are pivotal in quantifying the contribution of individuals directly involved in SR&ED activities and allowing you to claim their salaries as part of your expenditures. Engineers, scientists, and other personnel contributing to the project should have their time meticulously recorded, and it can be advantageous to keep such details to establish a year-after-year growth timeline, both in terms of the cost of employees as well as proof of the project’s scope and scale. By establishing a clear link between time allocation and SR&ED tasks, you provide tangible evidence of the human resources invested in advancing innovative initiatives.
3. Technical Documentation
The backbone of the SR&ED program is scientific exploration and addressing technological uncertainty. A common mistake companies make when filing an SR&ED claim is failing to adequately document how your project resolves technological uncertainty. Ensure all provided documentation outlines the uncertainties your project aims to resolve, all hypotheses tested and the outcomes of the R&D work. The clearer you can articulate the technical intricacies, the stronger your case for SR&ED eligibility becomes.
4. Financial Records
Financial records are a key part of successfully filing an SR&ED claim. In order for your expenses to be accepted, you’ll need to maintain accurate financial reporting that includes meticulous records of invoices, receipts, and other financial documentation directly associated with the SR&ED project. All records should be explicitly linked to expenses associated with SR&ED activities like labour, material costs, overhead, and more. Be prepared to demonstrate how costs correlate in additional detail (extrapolating from the areas already highlighted above) as needed, and make sure to hold on to financial records for the duration of your project to make sure you don’t miss older details that may become relevant later on down the road.
5. Partner with a Consultant
While your internal team should always be focused on maintaining clear documentation, partnering with a dedicated SR&ED consultant is often one of the best ways to ensure that your “proof” is properly compiled. There’s no substitute for the knowledge and experience of a seasoned SR&ED consultant who has submitted many past claims.
SR&ED Advances with Easly
At Easly, we know that scaling companies face cashflow challenges as they grow, particularly those that are pre-revenue. Our SR&ED advances make it easy to maintain momentum by giving you the option to finance your earned SR&ED credits at any time throughout the year.
Easly is here to help you access the funds you need to accelerate your growth. Contact our team today to learn more about our SR&ED advances.
