What advice can you give to new developments or start-up companies?
You should speak with your accountant about how to structure your company finances, as there will likely be more concerns than just maximizing SR&ED credits. That said, here are some suggestions related to SR&ED credits that you should keep in mind:
- Plan to pay any owners doing SR&ED as employees. Most SR&ED credits typically come from labour expenses. You won't be able claim credits for all your time and hard work if you don't pay yourself. Note: management fees, bonuses, non-arm's length contractor payments and other non-T4 type labour payments generally are not eligible for SR&ED credits. For SR&ED purposes, you want owners paid standard wages (with a T4 slip).
- Accrue wages if necessary. Many new companies can't afford to pay their owners while the company is just starting out. But this is often the period when the most SR&ED is likely to occur. Solution: you can accrue wages, to be paid once company income is sufficient. Please see Can we claim SR&ED expenses that are unpaid within 180 days of year-end? for more details.
- Have your potential SR&ED pre-evaluated either by the CRA, or by an SR&ED consultant. Cash flows and time tend to be limited during the first few years, so it can be helpful to know before you submit a claim whether it is likely to be successful. An SR&ED consultant can also help you implement a system to document the research performed, as well as any applicable hours and costs. This can decrease the time and work required to assemble an SR&ED claim, and increase your likelihood of a successful claim.