You’re ready to claim R&D tax credits. Now what? You can choose to handle your claim in-house or you can outsource to a professional consulting firm. We lean towards the latter and will explain that for you below.
As a reminder, the SR&ED program is one of the largest tax incentive programs in Canada for both small and large businesses. Projects must meet the following three criteria to qualify:
- Technological Challenges
- Technological Uncertainty
- Technical Content or Iterations
In this quick video, Boast Capital Partner Jeff Christie explains the three criteria and the questions he asks to determine whether your projects qualify for SR&ED: Watch the video
If your claim is approved, your company could receive a generous amount of investment tax credits (which are refundable for SMEs!) It might sound easy to submit a claim, but in fact, it’s not.
Here are the pros and cons of outsourcing your SR&ED claim to a professional consulting firm:
Pros of Outsourcing Your SR&ED Claim
Save Time Internally
Outsourcing your claim will enable your technical team to focus their time. They can continue building great technology, conducting research & development or getting your products out the door. We don’t know about you, but chances are your CTO wasn’t hired to prepare technical reports and SR&ED financials.
Leverage Specialized Expertise
Deciphering what’s eligible and what’s not can be quite difficult. Many times, experienced consultants will work with a company and discover many other projects that are eligible but hadn’t been claimed up until that point because of a lack of knowledge of the program. Consultants are extremely familiar with the intricacies of the program, are able to advise your team on technical documentation and help you establish processes to ensure your claim will be thoroughly supported during a CRA Review.
Receive Assistance with CRA Reviews
Our firm helps clients with SR&ED claims from start to finish, and this includes CRA Reviews. CRA Reviews (not to be confused with tax audits) can be quite intense and require thorough preparation. An experienced SR&ED consultant will be able to walk you through what to expect, will ensure you’re prepared, and will take part in the Review meeting. This added expertise relieves pressure on your internal resources and allows them to concentrate on normal business activities.
There is always a fee for service and value-added expertise. However, the upside is that many SR&ED consultants offer their services on a contingency basis – they only get paid once your claim has been successfully processed. So, it will take a few months until they get paid, but at least you know that you both have ‘skin in the game’ and they will put in every effort to make your claim go through successfully.
Must Share Documentation Externally
If you choose to outsource your claim, you’ll be sharing important documentation externally. To prepare your claim, SR&ED consultants will need to review your technical documentation as well as relevant financials including T4s and time tracking sheets.
Are there any pros or cons that we missed? Let us know. Also, here’s a blog post on the 7 questions you should ask your potential SR&ED consultant before signing an engagement letter.