SR&ED Tax Credit – Synchronizing Research & Development Grant Writing
Grant writing for SR&ED is a process that is synchronized with the actual conduct of the research and development to achieve ideal results. However, your company may not have been aware of the SR&ED tax credit program until some time after commencement of a development project, or may have known about the program and had best intentions to apply in a timely manner, but now faces the elapse of time with a partial or non-existent submission in hand.

The good news is that if less than 18 months have passed since your company’s taxation year-end in which the research and development was begun or undertaken, the SR&ED tax credit application, which is made for each fiscal period (usually 12 months), can still be submitted for those activities. Generally, an SR&ED project is considered to have begun when the technological objectives were defined and the technological uncertainties were recognized, however in some cases it is only in retrospect that a company realizes it was in the middle of an SR&ED project in any case! TSGI will work with you to find company documentation to support such a case, as well as for any circumstances. But, if 18 months plus one day have passed since the tax year-end, sadly, the potential claim lapses. Knowing when to apply is critical.

An example illustrates the timing for the SR&ED tax credit:
      A company has a December 31 taxation year-end.
      A research and development project was begun on July 1, 2007 and therefore falls in part or wholly          within the 2007 taxation year.
      If the SR&ED application is filed by June 30 2008 in concert with the general tax return, the cash          benefit of the tax credit is generally realized by about October 31 2008 [for “refundable” claimants;          see What is SRED.
      If the SR&ED application is filed by June 30 2009, the company can still be eligible for the SR&ED          tax credit for the 2007 work. Receipt of the cash benefit of the tax credit just takes longer – in this          example around February 28 2010 for refundable claimants. On the positive side, the year           2008 may also have seen research and development expenses associated with the continuing (or          possibly new) SR&ED project(s) and the application can be made for both years at once. [For 2007,          the general  tax return - since it must normally be filed within 6 months of the tax year (i.e., in this          example by June 30th 2008) - is “adjusted” for the SR&ED credit.]
      For non-refundable claimants, the above timing is identical except that the processing time is 12          months from time of filing, 3 months longer than refundable claimants
      If the SR&ED application is filed after June 30 2009, regrettably the 2007 project expenditures are          “statute-barred” with no opportunity to rescue them. This is a situation that has been tested and          upheld at the highest level of Canada’s Courts. However, if the research and development project          continued after the tax year-end (January 1 2008 or later in this example), subsequent activity and          the associated expenses on the continuing project (if technological uncertainties continued; see          criteria) can still be applied for, again within the 18-month rule as outlined above.

Caution: if a submission is made very close to the 18-month deadline (about one month prior), and CRA’s screening process finds it incomplete (according to specific requirements) after the deadline has passed, CRA is within its rights to turn down the application for the statute-barred period. This has also been tested and upheld in the Courts. TSGI’s process and grant writing expertise will ensure that an “incomplete” verdict will not be delivered for your claim.

Application for a Grant Under the Industrial Research Assistance Program (IRAP)
The IRAP program, being a forward-funding research and development program, has no ties to the income tax return with respect to timing of application. An application may be made at any time, but the National Research Council does experience a general cycle of program funding driven by the federal government budgeting process. Consequently, there are times of the year that it is “better” to submit an application; if your research and development project is flexible in its timing, the application for a grant can be prepared, preliminary discussions held with the NRC, and the formal submission made at a favourable time. Our grant writing team is familiar with these nuances and is ready to guide you through the government grant applications process.