... tax back for your research

My taxes are due, but I need a bit more time to complete my SR&ED claim. Should I file the claim now, and submit the SR&ED claim as an amendment, or delay the return, and submit both together?

There are advantages to filing the SR&ED claim with the tax return (faster processing times for one - see How long will it take to process my claim?). As a result, if the delay will only be a few days, we generally recommend delaying the return so that it can be filed all together. That said, every case should be evaluated individually, and for longer delays, the penalties for filing a late return can outweigh the benefits of filing the SR&ED claim with the rest of the return.

In all cases we recommend you consult us or some other tax consultant to determine your best course of action. For your information, here is a summary of the penalties that can arise from filing a late filing of a corporate tax return:

For corporations that both owe taxes and pay in installments (this applied to the majority of corporations), the balance of the corporations taxes are due 3 months after the end of the fiscal year for CCPCs (Canadian Controlled Private Corporations), 2 months after the end of the fiscal year otherwise. Interest is charged on late payments. Therefore to avoid interest charges, the tax forms (and SR&ED claim) should be filed within 3 months of the Fiscal year-end for CCPCs and 2 months of Fiscal year-end otherwise, for corporations in this category.

Reference: CRA: Balance due dates

Whether or not corporations pay in installments, corporate tax returns are due 6 months after the Fiscal year-end. The penalty for late filing is:

  • 5% of the unpaid tax that is due on the filing deadline; plus
  • 1% of this unpaid tax for each complete month that the return is late, up to a maximum of 12 months.

If:

  • the CRA issued a demand to file the return; and
  • they assessed a failure to file penalty for the corporation in any of the three previous tax years;

then the late filing penalty is increased to:

  • 10% of the unpaid tax when the return was due; plus
  • 2% of this unpaid tax for each complete month that the return is late, up to a maximum of 20 months.

Reference: CRA: Filing late and penalties

Note: although there are no specified penalties for late returns when no tax is owing (within 3 years of the fiscal year-end, after which the corporation loses any refunds that they may have been owed), corporate returns are still due 6 months after the corporate fiscal year end, and should be filed within that time period whenever possible. The CRA can apply other penalties to ensure late returns are filed (withholding tax refunds from other years until all late returns are filed, for example).