What Are Common Mistakes When Claiming SR&ED?

As Canada’s largest source of R&D-focused financial support, the Scientific Research and Experimental Development (SR&ED) Program helps tens of thousands of Canadian businesses pursue innovation by providing over $3 billion in tax credits annually. Claiming SR&ED credits allows eligible companies to receive substantial financial support in the form of income tax deductions and refunds, which in turn help to reduce the strain of covering your overhead and enhance your ability to pursue research and development (R&D).

While the benefits of SR&ED are undeniable, there are a few common mistakes that can cause issues with your filing and result in delays, audits, reduced credits, or even a claim rejection. At Easly, we’re passionate about helping Canadian businesses get access to the funding they need to pursue R&D and advance domestic innovation; to help your business avoid some of the most common pitfalls during the filing process, be sure to follow our advice and avoid the three most common errors made below!

Poor Documentation

One of the most prevalent issues that lead to an SR&ED claim being denied or subject to review is a lack of sufficient documentation. The SR&ED program requires that those who file maintain and submit thorough documentation that proves that their work is eligible under program guidelines. Your documents need to provide detailed records to substantiate the eligibility of the work conducted, the technological uncertainties faced, and the expenditures incurred. Poor records or ambiguous data can make it hard to justify your claim and lead to significant headaches during the filing process.

Poor documentation also applies to incomplete or inaccurate technical narratives that inadequately justify the scientific or technological advancements sought through your work, the challenges encountered, and the approaches taken during the research and development activities. An incomplete narrative tends to lack clear methodology explanations, fails to cover technical difficulties, and may gloss over innovative aspects in favour of creating a “pitch” for the desired result instead. It is crucial to remember that, when claiming SR&ED, you’re not convincing the government that your project will succeed (and in fact, success is not a condition of eligibility); you are proving that your project advances scientific research and helps to improve upon existing (or new) technological uncertainties.

Failure to Identify All Eligible Activities/Expenditures

In addition to poor documentation, companies often miss their opportunity to claim the full gambit of eligible activities that are involved in their research and development efforts. Expenditures like salaries, materials consumed, experimentation or analysis activities, necessary overhead and operating costs, and other related activities can all be eligible to help maximize your SR&ED claim. To make sure you don’t miss any vital components that should be included in your claim, working with an external consultant (more on that in a moment) can be extremely helpful and guide both new and experienced filers in the right direction.

Issues With Self-Filing

Claiming SR&ED requires accuracy and expertise. Often, partnering with experts is your best bet when it comes to staying ahead of the curve. SR&ED Program guidelines are robust and subject to occasional updates. Knowing the specific details you need to succeed can be difficult. Also, businesses that utilize multiple government support programs will find claiming complexity increases. While some businesses prefer to self-file, it’s never a bad idea to get the help of an expert SR&ED consultant to increase your odds of the best result possible.

Overcoming the Wait Time for Funds

Those filing SR&ED claims may be surprised to learn that it can often take weeks or even months to receive your refund – not to mention you only receive the SR&ED refund once a year, but you spend on SR&ED-eligible work all throughout the year. With pressing R&D projects that can’t wait without compromising results, financing your earned SR&ED credits is the strategic move. Partnering with an experienced lender like Easly makes it easy to avoid funding slowdowns and to keep your research going. Our team has deployed over $160 million in advances for SR&ED claimants Canada-wide. Our streamlined process can see you funded within two weeks of applying, allowing you to continue focusing on what matters most when it comes to running your business.

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