Budget 2013 - Scientific Research and Experimental Development (SR&ED) Tax Incentive Program

Notice to the reader

Budget 2013 proposed a new penalty under the Income Tax Act in respect of each SR&ED tax incentive program claim if prescribed information is missing, incomplete or inaccurate. This measure received Royal Assent on December 12, 2013, and the new rules became effective on January 1, 2014.

To access SR&ED tax incentives, Form T661, Scientific Research and Experimental Development (SR&ED) Expenditures Claim, must be completed and submitted to the CRA by the reporting deadline. Taxpayers are currently requested to only provide limited information to the CRA about the external consultants that prepared certain parts of their SR&ED tax incentive program claim.

For claims filed on or after the later of January 1, 2014, and the date of Royal Assent, the budget announces that the CRA will require additional prescribed information in respect of tax preparers (including external consultants) who have assisted with the preparation of an SR&ED tax incentive program claim.

What information is currently requested on Form T661 in respect of the preparers that assisted in the preparation of an SR&ED tax incentive program claim?

Currently, the taxpayer is only required to provide the name (or the firm's name) of the external consultant that prepared the response for section B or section C of Part 2 of Form T661 and the name of the person or firm who completed Form T661.

What  additional prescribed information will be requested on Form T661 in respect of the preparers that assisted in the preparation of an SR&ED tax incentive program claim?

Form T661 will be revised to require the business number of each preparer and details about the billing arrangements, including whether contingency fees were used and the amount of the fees payable. In instances where no preparer was involved, the taxpayer will be required to certify that no preparer assisted in any aspect of the preparation of the SR&ED tax incentive program claim.

What is the amount of the new penalty that will be applied if prescribed information is missing, incomplete or inaccurate?

The budget proposes to introduce a penalty of $1,000 in respect of each SR&ED tax incentive program claim made by a taxpayer for which prescribed information in respect of the preparation is missing, incomplete or inaccurate.

Who will be liable for the new penalty?

Where a preparer participates in the preparation of an SR&ED tax incentive program claim, the taxpayer and the preparer will be jointly and severally, or solidarily, liable for the penalty.

Where can I get more information about the changes to the SR&ED tax incentive program?

The CRA is committed to providing taxpayers with up-to-date information. The CRA encourages taxpayers to check its Web site often. All new forms, policies, and guidelines will be posted as they become available.

In the meantime, please see the Department of Finance Canada's Budget 2013 documents for details.

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