It is common knowledge that a company has 18 months following their fiscal year end to submit a claim for SR&ED Investment Tax Credits (ITC). The claim can be submitted concurrently with a T2 or filed later as an amendment. However, the time you will wait before receiving your SR&ED ITC or cash depends on three factors: (a) how the SR&ED claim is submitted, (b) when it is submitted, and (c) whether the claim triggers a review.
When a SR&ED claim is submitted as an amendment, the CRA will typically review it within 8 months following submission. If a SR&ED claim is filed concurrently with your annual tax return, the CRA will usually process the claim within 3 months following submission. Provided your SR&ED claim doesn’t trigger a CRA review or an audit, your refund will be on the way shortly after the claim is processed.
It is also not uncommon to file two SR&ED claims simultaneously: one concurrently with the tax return and another as an amendment for the previous year’s tax return. In this case, it is possible that both SR&ED claims will be processed together. Our experience shows that when this scenario occurs, the tax credits and refunds for both years are usually realized within 3-4 months following the submission of the claim, provided the SR&ED claim is accepted as filed.
While everybody gets concerned with the time it takes CRA to process the SR&ED claim, few people pay attention to the fact that the clock starts “ticking” from the date of submission, not from the date of the fiscal year end. A Canadian corporation has to file its corporate tax return within 6 months following the fiscal year end. In many cases there is no penalty for not filing the return on time, so the returns may not get filed for years.
If you use an external accountant, s/he is likely to schedule work on your tax return based on the filing deadline which is 6 months following the fiscal year end. However, from a company’s perspective this may not always make sense as it will delay your SR&ED refund by a minimum of 9 months after your fiscal year end. This situation can be easily reconciled. Often all you need to do is to communicate your intentions to your accountant in advance and make sure the time is allocated to file the tax return on your schedule.
At Mobile Capital we work with our clients on ongoing basis to help structure and manage SR&ED activities throughout the year. This familiarity with clients’ SR&ED projects usually allows us to complete the client’s SR&ED claim within 4 weeks following the fiscal year end. When our clients notify their accountants about their intent to file the return shortly after the fiscal year end, the return, along with the SR&ED claim, can usually filed within a month following the fiscal year end. The result is that in most cases, our clients receive their tax credits or cheque within 3-4 months following their fiscal year end.
If the CRA decides to review your SR&ED claim, the time it takes to process the claim increases accordingly. The time it takes to approve a claim depends on the reviewers’ availability, the company’s readiness to defend the claim and the quality of the claim.
There is really no recipe on how to speed things up in the case of a review. The best solution is to file solid and well substantiated SR&ED claims that raise no questions and are easy to defend.
At Mobile Capital we help our clients to prepare solid, well-substantiated SR&ED claims in a timely fashion. For more information, please, visit us at www.mobilecapital.net or contact us at email@example.com.