Filing requirements – Top 20 projects; SR&ED program management improvements
February 11, 2010 (10-1)
Following the introduction of the new Form T661 in November 2008, the Canada Revenue Agency (CRA) adopted a temporary measure allowing claimants with more than 20 scientific research and experimental development (SR&ED) projects to file Part 2 of Form T661 for only the 20 largest SR&ED projects, as determined by dollar value.
Initially, this measure was to be applicable only for the 2009 taxation year of SR&ED claimants. On February 4, 2010, in response to concerns expressed by taxpayers and tax practitioners, the CRA announced that it will continue to accept until further notice claims with Part 2 of Form T661 for only the 20 largest SR&ED projects.
The CRA noted, however, that while SR&ED claimants are not required to file a Part 2 of Form T661 for each project claimed, they should be prepared to submit to the CRA, upon request, a complete Part 2 for any, or all, of the projects. Failure to provide this information could result in the disallowance of SR&ED expenditures.
The CRA has updated its application policy SR&ED 2004-02R4, Filing Requirements for Claiming SR&ED, to reflect this change in filing requirements.
On January 13, 2010, the CRA announced that improvements would be made to the SR&ED tax incentive program. These changes are one of the results of consultations conducted by the CRA and the Department of Finance in the fall of 2007 on how to make the SR&ED program more effective for Canadian businesses.
The modifications to be introduced will not affect the value of the credit per se, but they will improve the SR&ED claim process by, among other things, making it more transparent.
First, the new manual for CRA officials, which will come into force on April 1, 2010, will include two new directives:
- CRA officials are to spend more time explaining the SR&ED program requirements, process and decisions to claimants and their representatives.
- CRA officials should advise claimants or their representatives whenever they notice that an expense that could have been claimed as an SR&ED expense was not claimed as such on the SR&ED form.
As well, beginning in July 2010, the CRA will begin to post quarterly reports on its website, “on the time it takes to review an SR&ED claim from start to finish”. This last measure will help claimants to better plan the overall process and schedule of an SR&ED claim.
Finally, the CRA addressed the issue of consistency in its decisions, which has been raised numerous times by claimants and tax practitioners. The CRA stated that its officials continue to work on this issue and will propose new solutions. Consequently, the CRA “will soon be announcing further enhancements to the SR&ED program”.
These changes demonstrate the commitment of the CRA to a collaborative approach with taxpayers and their advisors in continuously improving this important program.
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