How to Best Navigate the SRED Tax Credit

(Scientific Research and Experimental Development)

Your company may be able to be involved in scientific research, which then may entitle you to a certain tax benefit. The government uses this as an incentive to get businesses of all sizes aiding research and development in our country, and promises a generous return. While this can be incredibly beneficial for your company in financial respects, so navigating the tax filing for it can be challenging. This shouldn’t deter you from working with SRED, you just may need to plan for some extra help.

1. Consult with a SRED consultant

Discuss your company’s research and development activities to determine which ones qualify for SRED. Doing this in advance can help keep your records organized and up to date, which will be helpful at tax season.

2. Set up your accounting system properly from the start

This will help to easily classify qualifying R&D expenses (you could use classes or the chart of accounts to do so) and will expedite all processes in the future. Contact an expert in accounting software setup – for instance, Entreflow offers Quickbooks Online Setup services or Xero Setup services.

3. Don’t forget about the overhead relating to the specific activities

This is also a qualifying expense – use time tracking to ensure your numbers are correct and properly categorized.

4. Books need to be up to date so reports can be generated quickly at tax time

The help of an accounting consultant or bookkeeper is recommended to keep on top of this, freeing up the boss’s time for day to day focus on the research and development itself. Entreflow offers accounting services for startups and has Accountants in Vancouver and Toronto Accountant services and across Canada using cloud accounting.

5. Hire consultant to do SRED and use same one year over year

This way they are familiar with the work you are doing and the categories that the work falls under, no need to jump around if one consultant is doing well, it will get easier every year they are there. Keep in mind that some consultants are contingency as well as some charge a percentage of the claim.

This wonderful tax incentive put in place by the government allows companies to grow and contribute to society. So the reward is definitely worth the hassle. But, SRED doesn’t have to be a burden on your tax season, as long as you are properly prepared and organized with your reports. Don’t shy away from the idea of getting corporate tax and credit services because hey can make sure you are getting the most out of your return. Visit the Entreflow website to contact our CEO Helina Patience for some reliable consultant contacts to get you started.