What you don't know can hurt you. SR&ED claim case study.

12 Mar 2018

Shawn Rosenzweig

Applying for the SR&ED tax credit is a complex matter for which it is strongly encouraged to seek expert advice. We were recently referred to a mid-size manufacturing company that designs and builds custom motors for clients worldwide. We had a meeting with the owners to discuss the potential of filing a SR&ED claim, which is something their existing accountants had neglected to explore with them.

Our initial consultation uncovered the fact that the company had indeed been engaged in SR&ED activities for many years, based on special requests from their customers to modify the motors in order to accommodate the extreme temperatures of local climates. Upon closer examination, we identified that the company had been involved in SR&ED related projects for more than 6 years. Unfortunately, the government restricts retroactive claims to a maximum of two years.

We worked with the client to gather all the labour, material usage and subcontractor time that was required in order to test, modify and test again the specifications requested by customers throughout the previous two years. Because at no time was there certainty that these specifications could, in fact, be achieved, these projects were considered eligible for the SR&ED program. In this case, where the client did not even realize they were doing work that qualified for the SR&ED tax credit, with our help they were able to carve out a sizeable claim amount to $230,000.

Takeaways: It doesn't hurt to investigate! If you are not sure but suspect that you may in fact be engaged in SR&ED qualifying activities, seek professional assistance. An hour of your time invested up front can save you the heartache of an unrealized cash refund. Ask the right questions now to ensure that you receive the cash refunds to which you are entitled.