SR&D Tax Credits have audit risks

SR&D – Scientific Research and Development Tax Credits require audit ready bookkeeping

Scientific Research and Development program is administered by CRA. This is like having a fox run a hen house.

The Scientific Research & Experimental Development (SR&ED) Tax Incentive Program – federal tax incentive program, administered by the Canada Revenue Agency (CRA), that encourages Canadian businesses of all sizes, and in all sectors to conduct research and development (R&D) in Canada.

It is the largest single source of federal government support for industrial R&D. The SR&ED program gives claimants cash refunds and/or tax credits for their expenditures on eligible R&D work done in Canada.

This also serves as a major source of audit information for CRA. So when someone applies for the credit, they are automatically flagged. I have heard of at least on SR&D company who helps Canadian Businesses get these grants, has had 100% of their clients audited. Now being that CRA is the one who approves the credits, how is it that CRA would audit all of certain companies clients?

I can tell you what it looks like: It looks to me like a clever scheme to recover more money in punitive actions than they give out. In my opinion if you are going to apply for the credits you better have audit ready bookkeeping and have a tax expert do an overview audit to see if you are in a good position to avoid having your business in turmoil for the duration of anywhere from a few days to a few years.

To read info on audit ready bookkeeping, click here.

If you are being audited for reasons such as this, be sure to let us know so that we can help you get matters resolved.

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