How to Maximize Your SR&ED Tax Credits

Are you wondering how you can make the most of your SR&ED tax credits and optimize your operations as we move into the last quarter of 2023 and prepare for 2024? With Canada and most of the world facing a down market full of challenges for businesses to overcome, knowing how to maximize your capital and extend your runway is key to protecting your operations and managing your bottom line.

The Scientific Research and Experimental Development (SR&ED) tax credit program is designed to support Canadian businesses engaged in R&D activities and to incentivize continued innovation within the domestic market. If you’re looking to make the most of your SR&ED credits, below are some of the most important aspects to keep in mind.

Understand What Is and Isn’t Eligible

One of the most prominent reasons businesses miss out on maximizing their SR&ED tax credits is that they fail to understand the scope and eligibility of the program fully. While we go more into detail about the SR&ED program and what qualifies here, we strongly advise that business owners take the time to familiarize themselves with the Government’s requirements and, if necessary, consider utilizing a trusted SR&ED consultant to ensure they don’t miss key details that may lead to missing out on potential credits or having their claim be subjected to an audit.

Document, Document, Document

Another issue that commonly triggers SR&ED reviews is a lack of and/or poor documentation. In order to receive the maximum refund, you’ll need to ensure that you have meticulous records and documentation of all aspects of your R&D activities, including research plans, design iterations, reported findings across different phases, procedures, data analysis, salaries, etc. Detailed documentation not only makes it easy to file your claim, but it also helps you answer any additional questions from the CRA should you need to down the line, as well as boosts your internal records for any other sources of funding you may choose to pursue.

Identify All Eligible Expenditures

In addition to eligible activities, businesses should be aware of the various expenditures that are eligible under the SR&ED program’s guidelines. Such expenditures include employee wages, subcontractor costs, materials and equipment directly related to eligible activities, and more. Keep a detailed record of these expenses, ensuring that they are properly allocated to the corresponding projects. By thoroughly tracking and documenting all eligible expenditures, you maximize your chances of claiming the full range of tax credits available to you.

Speak With a Consultant 

As mentioned above, partnering with an SR&ED consultant can be a valuable way of making sure your claim contains all relevant information and sets your filing up for success. Consultants understand the unique nuances associated with the SR&ED program and are able to review your documentation to assess any areas that may be lacking before your claim goes to the CRA. Whether it’s your first time filing or you’re a seasoned veteran, when it comes to sourcing external funding, it’s always beneficial to bring in a specialist to help boost your chances of a larger refund!

Review and Finesse

It may seem redundant, especially if you’ve worked with a consultant, but it is always advisable to take the time to review your documentation for accuracy. Look for opportunities to strengthen your claim by providing additional evidence, clarifying technical aspects, emphasizing the impact of your research and development activities, and ensuring your claim is consistent, well-structured, and clearly demonstrates how your projects meet the program’s eligibility requirements.

Stay in the Loop

The SR&ED program is subject to periodic updates and changes, albeit infrequently, meaning that, even if you have successfully filed before, it’s imperative to stay on top of any evolving requirements and/or guidelines. Regularly review the program’s official documentation and consult with professionals to ensure compliance and take advantage of the additional advice they may be able to provide to keep you set up for success.

Extend Your SR&ED Finance Runway with Easly

Once you’ve filed your SR&ED claim, the waiting period begins. What new filers may not know is even once your claim is approved, it can take weeks or even months to receive your funds. R&D projects often require upfront capital, making SR&ED financing a strategic way to maintain a healthy funding base.

With Easly Advances, you can tap into your SR&ED credits as they accrue throughout the year, well before you file. You can continue to draw down as you accrue more tax credits throughout the year, providing frequent, non-dilutive capital that smooths cash flow. Our streamlined process can see you funded within two weeks of applying.

To learn more about the role of SR&ED refund financing in your company’s capital-raising efforts, contact Easly today!