SR&ED Examples, SR&ED Report Examples, SR&ED Claim Examples, and Experimental Development Examples are some of the most requested items that people look for when thinking about preparing their SR&ED.
Before we provide some examples, it only responsible to put a disclaimer. Self-filing your SRED, or filing your SRED with a general purpose accounting company is an extremely risky endeavour. G6 Consulting Inc has over 12 years of experience specializing in the SR&ED program. SR&ED experts such as G6 often work on a contingency basis, with payment only based on a percentage of SRED credits once received. You can contact G6 for a free consultation here. https://www.g6consulting.ca/contact/
Nobody files their own T2. They use one or more accounting firms. Yet some percentage of firms write their own SRED claims. I don’t understand it. SRED is more complicated than filing your taxes. Ask the CRA. They use PhD’s to evaluate your SR&ED claim. There aren’t a lot of PhDs perusing corporate T2s. Maybe none.
Despite this, some Canadian firms do write their own SRED reports. We have an audit defense practice which helps those companies if things go sideways with the CRA: https://www.g6consulting.ca/audit-defence/.
With this disclaimer out of the way, here are some SR&ED examples.
Every few years, the CRA release a new batch of SR&ED report examples. The current batch, released in 2015, are quite good. There are 6 SRED report examples in the main writeup here: “Eligibility of Work for SR&ED Investment Tax Credits Policy” https://www.canada.ca/en/revenue-agency/services/scientific-research-experimental-development-tax-incentive-program/eligibility-work-investment-tax-credits.html.
Here is some context for each of the six CRA examples linked above
This example deals with the difference between a technical unknown and a technological unknown. Technical unknowns can be solved with existing technology. Solving a technological unknown leads to a technology advance.
This example provides an illustration of a technical problem, corroding pumps caused by processing a corrosive liquid, vs development of a high temperature seal which can prevent corrosion in a pump. The latter is determined to be a technological advancement because there is no data available on seal behavior at elevated temperatures.
Cost targets or cost reductions are not technological obstacles. However, cost goals can lead to work performed and engineering tradeoffs that result in technological obstacles and qualifying SRED work.
This example shows that standard techniques like crop optimization by tuning parameters such as fertilizer, water or CO2 is not SRED. Likewise, troubleshooting in a manufacturing environment using known techniques is not SRED.
This example illustrates that new products and processes can be created using standard engineering techniques. Work of this type is not SRED because there has been no technology advancement vs a technological obstacle.
Shop floor SRED is qualifying work which occurs in a production setting, not in a lab or dedicated test facility. Often production facilities are used to make sample products which can be tested to see if the desired advancement has been achieved. In this example, a manufacturer of field hockey sticks has changed his production process to consolidate manufacturing stations and improve stick consistency. He has determined statistically that he needs 500 sticks for testing to see if he has met the new standard. When he produces a 2000 stick test run, 500 of the sticks (only) can be claimed as SRED scrap material.
Here are two further project write-ups in “SRED While Developing an Asset Policy” by the CRA. These examples deal with specialized rules for claiming prototype parts as SRED materials when there is collaboration between two companies.
Here are very specialized CRA examples of allocating SRED amounts and claiming overhead amounts when experimental production occurs in a production environment.
Here’s a bonus SR&ED report example of a software claim. This example is dated by the fact that it uses an old version of the T661 but it’s still a good illustration of a software project write-up: https://www.t661.tax/
G6 Consulting Inc has over 12 years of experience specializing in the SR&ED program. SR&ED experts such as G6 often work on a contingency basis, with payment only based on a percentage of SRED credits once received. You can contact G6 for a free consultation here. https://www.g6consulting.ca/contact/