SR&ED changes unlikely to have much impact on startups
Posted by Gary Will on December 03, 2008 at 02:10 PM
I read over all the briefings and the new CRA guide, and listened in on a conference call organized by Deloitte, and can't see how the much ballyhooed changes to the SR&ED form will have much of an effect on startups.
My conclusion was that the application form is still a pain in the neck, but no more so now than in previous years.
I've written more on my blog, but "no big woop" is an adequate three-word summary.
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I think you under-estimate the ability of Canada Revenue Agency to make life more complex.
The new T661(08) is targeted to small companies with few projects. It is a nightmare for large corporations who now must fit all their projects into a template as part of their corporate T2 tax filing. But don't think the little guys get off easy.
Instead of providing their accountant a well-thought out technical report on their SR&ED, they must now shoe-horn a text-based description into the limited word space addressing precise tax terminology, and select from an approved list of "evidence", "technology fields" etc. The accountant will have to "cut and paste" the client's information into the template of their T2 software.
No longer can you use a photo or a technical diagram to save a thousand words. You also can't use a thousand words. The task is now to find a technical writer that has the wordsmith skills of a poet with full knowledge of the tax and legal significance of each line.
The software companies are already reporting problems with making their products compatible with the new T661(08). The advice on the CRA website, that companies can use the old T661(07) form during a transition period won't work because of other software updates. There are inconsistencies between the new T661(08) and the Ontario OITC forms which have not been updated for tax years before Jan.1, 2009.
For twenty years, the accountants at CRA have tried to get their teckie advisor/reviewers to create a check-list to describe SR&ED. Finally the beanies have won. The CRA reviewers will have a hard time doing desk reviews from reading the poetry alone. More site audits will likely be required to fill in their understanding of the projects.
The new T661(8) looks like a miniaturization, not a simplification for small companies and start-ups. But for those large companies with 100 projects, it will require a 405 page T661 form. Not a fun cut-and-paste job for the accountants!
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