If your project seems to qualify for SR&ED (scientific research and experimental development), the next step is to prepare a proper application. This process may not be as easy as you thought because you have to show that your project or work contains research and development (R&D) and meets the requirements from CRA to proof it is eligible for applying. Therefore, it is critical for all the companies applying for SR&ED to document the whole project as carefully as possible.
Documentation is the most important as it is the only reference for the CRA to decide whether your project is qualified for SR&ED. Document your project, highlight the challenges and explain how you and your team overcome those challenges after the R&D process.
SR&ED Documentation Requirement from CRA
To be eligible to SR&ED claim, the CRA requires two types of supporting documents: documents of the claimed project and documents of the related expenditures.
- Documents Supporting the Project and the Work
- Documents Supporting the Expenditures
- List of Supporting Documents for SR&ED Application
- First Time to Apply SR&ED Tax Incentive Program
Documents Supporting the Project and the Work
According to CRA’s introduction, documentation is the best “supporting evidence”.
Documents of the project should contain all the information about how you developed your project, for instance, when and where the project happened, how the research was carried out, etc. According to the recommendations from the CRA, applicants should keep all the documents dated and be specific to each part of the project. Supporting documents for the project can be as follows:
- Project schedule — let the CRA be clear about the whole project;
- Technical challenges — the difficulties during the developing process, including experiments and the analysis of the experiment results;
- Project prototype — keep all the project prototypes and related annotations;
Other documents — meeting minutes, emails, paper notes, etc. The list of examples of supporting documents for SR&ED application is followed by for your information.
Documents Supporting the SR&ED Eligible Expenditures
On the one hand, the CRA offers two mandatory forms for the SR&ED applicants to fill in and submit:
- Form T661 — SR&ED Expenditures Claim;
- Form T2SCH31 — Investment Tax Credit (Corporations) or Form T2038 — Investment Tax Credit (Individuals).
On the other hand, other supporting documents may be required, such as financial statements, receipts, ledgers, and vouchers. Documents of the expenditures should also be dated to prove all the spending conducted in the same fiscal year as the project.
Regards on how long to keep the records for the SR&ED tax incentive program? 6 years, advised by CRA.
Don’t underestimate any document because even emails and notes can include important information. The better you prepare those documents, the faster the CRA proceeds your SR&ED claim. Moreover, sorting project-related documents is not only crucial for preparing future claims, but also beneficial for the project management of your company. Want to apply for SR&ED? Start sorting your related documents as soon as possible.
List of Supporting Documents for SR&ED Application
CRA lists examples of supporting information for SR&ED work and expenditures include (but are not limited to):
- project planning documents
- design of experiments
- design documents, technical drawings
- project records, laboratory notebooks
- design, system architecture, source code (software development)
- records of trial runs
- project progress reports
- minutes of project meetings, virtual meeting chats
- whiteboard drawings
- test protocols, data, results, analysis, conclusions
- final project report, professional publication
- photographs, videos
- prototypes, samples
- scrap, scrap records
- contracts, lease agreements
- records of resources allocated to the project
- time sheets, activity records, payroll records
- purchase invoices, proofs of payment
- accounting records
Again, DO NOT discard any related documents. Although some supporting documents may not be mentioned in the list, they might be solid proof of your project.
About the format of records, besides professional tools such as JIRA, GitHub, even Microsoft Excel files, Google Sheets could be accepted.
If you are unsure about whether any document is eligible, talk to a SR&ED professional to help you identify the evidence.
First Time to Apply SR&ED Tax Incentive Program
As introduced in SR&ED FTCAS – Everything You Need to Know, the first time SR&ED application is important as it will affect the returns and credits to you even in the upcoming years.
Reading carefully the guide provided by CRA, getting familiar with everything, and preparing all required documents well will help you maximize the returns and credits from SR&ED program, however, this can be a challenge to new applicants applying at the first time.
To help you:
- check the eligibility,
- well explain and prepare required documents,
- evaluate the returns and credits from SR&ED program,
SR&ED Application: Review Documents and Evaluate Eligible Expenses
For more information, following resources from CRA provide the most detail guide and information.
2022: The Latest Updated SR&ED Guide from CRA
The SR&ED guideline is updated in 2021.
The latest updates in CRA’s SR&ED eligibility guidelines include:
- What’s new: update the language, simplify the style, and provide more transparent information on SR&ED eligibility.
- What’s removed: to improve the simplicity, three categories have been removed from the new SR&ED guidelines
Read the full article about: The Latest CRA SR&ED Eligibility Guide, What’s Updated in 2021?