Remember key SR&ED considerations and put money in your pocket
Many companies leave tax dollars on the table through being concerned that the Scientific Research & Experimental Development (SR&ED) program is more trouble than it is worth – either because of the time frame for processing the claim or because of the data that needs to be compiled. However, a few options are available to support this process, which can significantly boost a company’s funding.
Get SR&ED cash early to fund current operations
If your company has come to rely on the SR&ED program to fund cash, one of your frustrations may be the amount of time it takes for the work of filing the claim to result in any benefit. This means that in the time it takes to process the claim, your company may run short of the cash needed to fund capital expenditures and operating expenses.
However, there may be a way to turn that claim into cash earlier than you’d expected — through financial institutions that are increasingly willing to provide finance on the basis of SR&ED claims.
This option is most available to companies that have already established a track record of three or more years of successful SR&ED claims, so that the financial institution can have greater confidence that the next claim will be successful.
There is still only a limited range of financial institutions that offer this kind of financing. Many of those involved in this area are alternative financial sources, with links to asset-based lending and factoring, which can involve taking a company’s invoices and using them as collateral for a loan, or outright purchase of the assets.
SR&ED loans can come at a high cost – typically, in the range of 20 percent on an annualized basis. However, a company that is facing a cash-crunch, possibly unable to pay a key supplier or meet its payroll, can find that getting access to SR&ED dollars early, is worthwhile.
Your SR&ED advisor will be able to recommend an institution to boost your funding.
Mobile and painless SR&ED claims, through current information technology
As mentioned, there can be a daunting amount of data to compile, which can be difficult particularly for a small, growing company with few established procedures.
Given the longevity of the SR&ED program, many technological solutions have developed to help companies meet these difficulties.
Operations and accounting systems support SR&ED filing
Many software systems are now available in Canada that have been adapted to securely capture, manage and share relevant development work and generate the necessary reports, for SR&ED purposes. Now easier to use and collaborate, employees are more likely to take the time to keep their time records and technical information up to date.
In some cases, mobile technology can help – accessing and creating relevant information via smartphones and tablets, synchronizing mobile and desktop. As well, having the information gathered to a remote server, using cloud-based computing.
This means less data “leakage” – small units of time might get lost if paper-based records are kept instead of electronic time logs. And, small units of time add up.
Mobile devices, combined with efficiently designed software, help to meet the CRA’s requirement for ‘contemporaneous’ reports, in which the information is gathered at the same time the work is performed. Being able to demonstrate the company’s ability to capture the data accurately and timely gives government authorities more confidence in the reports.
This also helps avoid a frustrating, time-consuming search for information when the 18-month filing deadline looms closer – the information has already been compiled, it just has to be collected into the appropriate form.
Computer-based data-gathering systems also make it easier to meet CRA’s preference for electronic documentation so it can easily scan files for technical information that may need a closer look. Companies utilizing appropriate systems will find an increasing data efficiency year over year, with significantly improved filing success, ultimately putting money back into their pockets.