To claim tax credits and get a refund by the SR&ED program, the first step is to fill out the forms that CRA requires. CRA determines the eligibility of the SR&ED project based on the information provided on the documents and forms. Form T661 is key to the SR&ED application.
Therefore, understanding some tips about filling it out correctly is crucial to maximizing companies’ chances of approving the claims.
Form T661 is a two-part form. The way of filling out T661 varies depending on each company’s situation. Ensure to complete all the required lines and keep in mind that some lines have length limitations.
Form T661 - Part One: Fill Out SR&ED Expenditures
Part one of the T661 allows applicants to fill out the SR&ED expenditures. All SR&ED-related expenses need to be included here, such as salaries, subcontractor fees, materials, etc. The following lines contain essential information that will need additional attention.
Line 300 to 340
These are the main SR&ED expenditure lines for salaries, materials, and subcontractor expenses. The material and subcontractor amounts need to be relative to the salary expenditures. Moreover, if the figures are in a range instead of exact numbers, they may look estimated, increasing the possibility for review.
Line 431
Other government assistance should be indicated here. For example, if the company receives Canada Emergency Wage Subsidy (CEWS) in the same fiscal year as SR&ED, the overlapped expenditures must be deducted.
Form T661 - Part Two: SR&ED Project Information
Part two of the T661 is a project-specific form, which typically describes the scientific and technological advancements of the project. The purpose of the following lines is to distinguish the SR&ED project from regular company projects. Keep in mind that the CRA is not interested in any commercial purposes but ONLY cares about scientific and technological advancements.
Line 242
Illustrate the scientific or technological uncertainties (Maximum 350 words). The first step is to describe the current knowledge base of your project. Then applicants need to indicate the limitations of the knowledge base or the technical barriers of the project.
Line 244
Describe the work that was performed to overcome those uncertainties (Maximum 700 words). Remember to fill it out in a readable way. The CRA wants to understand how the work was performed clearly and the following structure might be a good example to demonstrate:
- Hypotheses carried out to reduce uncertainties;
- Experiments to test the hypotheses;
- Analyses of the test results;
- Conclusions.
Line 246
The achieved or attempted-to-achieve scientific or technological advancements should be listed here (Maximum 350 words). This section is closely related to line 242, for the CRA is looking for the advancements that move forward the current knowledge base according to the project background.
Latest Changes on SR&ED Form T661
The CRA updated the details of SR&ED claims regularly and implemented the latest changes in December 2020. There are some major categories that applicants need to be aware of.
Line 758
The new section refers to overhead and other expenditures. The entered amount to this section is based on which method the applicant chooses. Applicants will enter the exact amount of the overhead costs by the traditional method. If applicants choose to use the prescribed proxy method, they will only need to enter “0” in this category because the CRA will calculate the amount based on a percentage of the overall salary and wage expenditures.
The removals
Line 350, 355, 390, 496, 504, 510, 512, 514, 516, 518, 532, 535, 540, 543, and 546 have been removed because the lease costs for equipment, the costs of shared-use equipment and capital expenditures are no longer SR&ED eligible expenses.
Download Form T661 and Get Latest Changes from CRA
The CRA website provides a direct link to download form T661 with all the latest changes.
There are some changes on the guide to Form T661, such as the extension of the SR&ED reporting deadline due to the COVID-19 pandemic, please refer to What’s new – Changes to T4088: Guide to Form T661.
Additional Resources: Most Popular SR&ED Articles
If you just started research and study on SR&ED tax incentive program and want to know how to apply SR&ED, or you are a first-time applicant for the SR&ED program, the most poplar SR&ED articles followed by will help more:
Talk to the SR&ED professional consultants who will help you know more about your SR&ED applications and get tax credit and refund for your business in Canada.
