Since as early as 1944, the Canadian Federal Government has been supporting scientific research through tax deductions. This incentive has evolved into the SR&ED program, dispersing over $3 billion annually through refundable and non-refundable tax credits. The CRA does a world leading job in defining the eligibility criteria and administering the program, however significant complexity and compliance means that many companies can’t manage the application process internally and rely on outside expertise.

There are hundreds of companies competing for the chance to write and submit your SR&ED tax credit claim. Their value proposition: free money. Ok, somewhat free money. SR&ED providers will charge anything from a small fixed fee to 30% of your claim value for something that is essentially a fancy essay about your technology and some spreadsheets.

This begs the question: Are they worth it?

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Is engaging a SR&ED advisor “worth it”?

The truth is: you can file a bare-bones, home-made claim and have it go through without any issues. Having your claim enquired or adjusted is a question of probability and CRA manpower. Audit rates range from 10-20% (depending on who you ask), and just like the fact that not everybody will get a personal tax audit, not everyone will get a SR&ED audit if their claim is weak or poorly supported.

Call it a dirty secret or an obvious truth, but you might be able to calculate your tax credit on the back of a napkin, send it in and have it paid out in 10 weeks with all the other technical descriptions (i.e. works of art) that are sent to CRA.

Emphasis on might.

Most companies can’t base their cash flow (including payroll, rent, and the kitchen fruit bowl) on “might”.  A SR&ED audit is the kind of burden you need to have experienced to understand, and it involves a kafkaesque series of calls, emails, clarifications, and about 6 months of bureaucratic back and forth. Add to that the fact that your claim could be significantly reduced, totally rejected, or simply just held up for 6-12 months, and you see why winging it could be bad advice here.

Working with an experienced SR&ED advisor who offers audit defense as part of their package acts as double insurance: against the event of an audit, and, if the audit does occur, against the need to deal with it yourself (probably badly, as “bickering on the phone to CRA” is presumably not your most endorsed skill on LinkedIn).


Should I get a SR&ED consultant when my claim size increases?

For the cost sensitive, it seems a cruel joke that most SR&ED providers charge a percentage fee contingent on the success of the claim. What is a $2,000 fee on a $10,000 claim quickly escalates to $40,000 when you’re claiming $200,000. It sounds ludicrous to pay this much for paperwork. Yet, it is exactly when the stakes are higher that having an advisor matters most.

The best companies we see are ones that treat their SR&ED process like a revenue-generating business unit. They devote significant resources internally (I’m counting time as a resource), and engage with their consultant regularly though the year. They work on tracking projects, documentation, and the financials so it’s all ready to be filed quickly at year-end.

It’s only natural for the Canadian government to be careful with its allocation of your hard-earned tax money, and so should you. Having a qualified advisor compile, file and potentially defend your claim can mean the difference between having 6 months of runway or 6 months of anguish explaining to an auditor how you’ve encountered “technical uncertainty” while you were building your shaving simulator app.

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What to consider when you're looking to file your SR&ED

Should you self-file?

  • Do I have SR&ED experience in the team already or a CPA who can navigate the program? If not, do I really want to learn it all myself?
  • If I learn it myself, is the opportunity cost of diverting resources away from core activities worth the money saved?
  • Am I sure that I can successfully identify all the eligible projects that I am doing and attribute costs correctly, so I can recover the correct amount? Or, will I miss something, potentially leaving funds on the table or over-claiming?
  • If I am audited, do I want to navigate that by myself or with someone who’s done it multiple times?

What the above questions are really getting at is this: Is the money “saved” by self-filing worth the effort?

The CRA does a great job of supporting new companies who want to self-file, so the resources are there if this is the path that you want to choose.


How to choose a SR&ED consultant

What you shoud ask yourself:

  • What level of service do I want, and at what cost? Offerings range from full service (they do everything) to rubber stamping your technical writing and accounts.
  • Am I willing to take on a large portion of the work internally?
  • Does the SR&ED consultant have experience in my sector?
  • Do they understand the technology I am building and the industry in general?
  • How engaged is my consultant?
  • Will I speak to them throughout the year to track my projects and make sure we are claiming the available amount? Or, is it just a one-time thing at the end of the fiscal year?
  • Do I want to work with a boutique, mid-sized, or Big 4 firms?
  • Am I treating SR&ED like a revenue-generating business unit? The larger your claim is, the more important this becomes, and expertise is required. Costs may increase, but so does the importance of the work.

The final word

The choice of getting or not getting an SR&ED advisor is a bit like investing. Some people want to do it themselves, they enjoy the research, the rush, the process, and ultimately the risk of managing their own portfolio. Others are happy to hand over a management fee to and experienced professional to lower risk and free themselves up to focus on other more valuable things.

You can DIY, of course, and may the odds be ever in your favor, but if you’d like predictability, do go for a good consultant. Also, if you’d like your money early through SR&ED Finance, a skilled advisor is highly valued.

Hope this helps you on your journey towards getting the most out of your SR&ED tax credit. Do let us know in the comments what your experience has been in the world of SR&ED.

Alexandra Kaschuta

Alex is a tech-focused funding expert, helping innovative companies grow through innovative funding through her work at Fundsquire. She also has a background in journalism, having written for outlets like Vice and many others in the past on topics ranging from philosophy to economics.