Since 2012 The CRA started introducing a number of mandatory changes to the SR&ED program. This resulted in significant drop of SR&ED budget from approximate $4b in 2012 down to $3.6b in 2014. The key changes include:
In 2012, The budget announced new funding of $6M over two years for the CRA to implement changes to the administration of the SR&ED program which includes:
-Conduct a pilot project to determine the feasibility of a formal pre-approval process;
-Enhance the existing online self-assessment eligibility tool;
-Work collaboratively with industry representatives to address emerging issues;
-Make more frequent and effective use of “tax alerts”; and
-Improve the Notice of Objection process to allow for a second review of scientific eligibility determination
In 2013, the budget announced the allocation of $5 million over two years to develop educational materials to SR&ED claimants. An additional $15 million was allocated over two years to conduct additional reviews of SR&ED claims where the risk of non-compliance or ineligibility is perceived to be high. Also,
-The proxy overhead percentage was reduced from 65% to 60% for CCPCs.
-Only 80% of the SR&ED contract amounts paid to arm’s length contractors allowed to be claimed.
Starting from January 1, 2014, every claimant must use the updated T661 form to apply for SR&ED tax credits for their 2014 fiscal year claims. Here are the changes on the new T661 form:
1-Regardless if claimants perform Basic Research, Applied research or Experimental Development claimants should now complete the following three questions in Section B (Project Description):
- What scientific or technological uncertainties did you attempt to overcome – uncertainties that could not be removed using standard practice?
- What work did you perform in the tax year to overcome the scientific or technological uncertainties described in Line 242? (Summarize the systematic investigation or search)
- What scientific or technological advancements did you achieve as a result of the work described in Line 244?
2. The proxy overhead percentage is reduced from 60% to 55% for CCPCs.
3. Claiming capital expenditures or the right to use capital property are now disallowed.
4. The federal SR&ED rate for large corporations (non-CCPCs) is reduced from 20% to 15%.
5. New section (Part 9) is added to disclose any third party tax preparers and their compensation arrangements on the T661 form. In instances where this information is not disclosed, or is viewed to be incomplete or inaccurate, a $1000 penalty will be applied, to be shared jointly by the preparer and the tax payer.
Check out Kelid™’s Interactive SR&ED Assessment Look Up to determine the total amount of cash/credit SR&ED refund.
If you are an established small to medium size business with at least 5 employees that has been incorporated for at least 2 years and engaged in manufacturing and or R&D in Canada, KelidTM will assist you to identify eligible funds according to the status of your business and lead you to make the right decision. We invite you to join our monthly news letter and follow us on Twitter, Linked-in, Facebook, or Google+.