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With tax season around the corner, businesses across Canada are busy reviewing financial details and preparing to leverage various government programs and funding sources, like the Scientific Research and Development (SR&ED) Program. As one of Canada’s largest funding programs for companies pursuing technological innovation, SR&ED provides a lot of value to the Canadian tech ecosystem. Knowing how to give yourself the best chance of avoiding an audit or review is essential to prevent delays that can leave you waiting for capital when it matters most.
At Easly, we know that access to capital is crucial for R&D projects and that SR&ED credits are often a key factor to ongoing success. Below, we’ll take a closer look at a few ways to give you a better chance of avoiding an SR&ED review so you can receive your capital as quickly as possible. Read on to learn more!
Document, Document, Document!
The number one error that leads to issues with SR&ED filings is poor/inadequate documentation. In order to maximize your chance of a successful claim and avoid a review, you must be as meticulous with your documentation as possible and focus on clearly documenting your objectives, methodologies, uncertainties addressed, challenges faced along the way, and how you utilized systematic experimentation in as much detail as possible.
Bear in mind that, when filing an SR&ED claim, in many ways, it’s less about what you do and more about how you do it. That is to say that you must not only prove that your project is, in fact, eligible (more on that below), but you must also be prepared to show details about how you pursued your project goals, such as time spent, materials used, alignment with claimed employee salaries and more. The more detailed and easily accessible your documentation is, the higher your likelihood of being successful when filing.
Aligning with SR&ED Guidelines
Another factor that can hinder your SR&ED claim is a poor understanding of what is and isn’t eligible under the mandate of the program. Remember: the CRA is concerned with verifying that your work is directly involved in R&D efforts that fit their qualifying parameters. Familiarize yourself with current guidelines (like any government program, SR&ED is subject to change) and focus specifically on details like the definition of eligible work, qualifying expenditures, and how to best record your compliance with each aspect.
While SR&ED encourages innovation and forward-thinking, your claims must be pragmatic and easily provable to qualify. Overstating the significance of uncertainties or exaggerating the technical challenges may trigger audits and can ultimately harm your funding in the long run.
Continued learning >> Check out the webinar Easly cohosted with our partners at Welch LLP, which is all about how to minimize audit risk and maximize your claim. Watch here.
Expert Guidance Matters
Partnering with a trusted SR&ED consultant is one of the best ways to avoid a review and maximize your return. Financial experts are able to take the time that business owners often cannot afford when conducting R&D to keep apprised of changes to the SR&ED program and are well-versed in reviewing (and refining) documentation to ensure full compliance when filing SR&ED claims. By working with an industry professional, you’ll remove much of the stress associated with self-filing and ensure that your company is able to put its best foot forward when submitting its claim.
Stay Up to Date and Self Audit
It’s worth noting that, even if you continuously use SR&ED consultants to file, it is a best practice to be proactive and take time to self-educate on new or evolving guidelines. Doing so puts you in the best position to pivot, properly document throughout the year, and advise relevant team members on changes that may need to be made with minimal hassle and confusion. Staying on top of SR&ED guidelines also greatly serves your interests if you are audited (which will most likely happen eventually if you continue to claim).
Conducting a thorough internal audit before submitting your SR&ED claim is another strategic measure that helps to ensure compliance and gives your team the ability to make changes before you encounter any issues with the CRA. Review your documentation, project details, and financial records meticulously and identify any potential discrepancies or areas that may require clarification.
Financing Your SR&ED Refund With Easly
The SR&ED Program offers beneficial support to Canada’s R&D sector, but the significant wait time for reimbursement of eligible expenditures is not ideal. For those looking for expedited capital solutions, financing your earned SR&ED credits with a trusted partner like Easly can be a streamlined way to access cash flow.
An Easly Advance is a founder-friendly way to access non-dilutive working capital on your schedule. You can receive your first advance in as little as two weeks after applying.
To learn more about the role of SR&ED financing in your company’s capital stack, contact Easly today!
