Guide
The SR&ED filing deadline, and why late is not late
Updated
Every SR&ED consultant will tell you there is a deadline. Fewer explain what happens on the other side of it, and the wording is more severe than most claimants expect.
The limit
Subsection 37(11) requires a prescribed form to be filed with the Minister in respect of any expenditure claimed as a deduction under the section, on or before the day that is 12 months after the taxpayer's filing-due date for the taxation year.
For a corporation whose return is due six months after the year end, that is eighteen months from the year end in practice. It is generous compared with most tax deadlines, and it is the generosity that makes it easy to miss: eighteen months is long enough for the people who did the work to leave.
What happens if you miss it
Subsection 37(12) provides that where a taxpayer has not filed a prescribed form in accordance with subsection 37(11), for the purposes of the Act the expenditure is deemed not to be an expenditure on or in respect of scientific research and experimental development.
Read that carefully. It does not reduce the claim, apply a penalty, or leave a discretion to be exercised. It changes the character of the expenditure. The work was SR&ED and the Act now says it was not.
Incomplete counts as missing
Subsection 37(11.1) provides that if the prescribed information in respect of an expenditure is not contained in the form, no amount in respect of that expenditure may be deducted under subsection (1).
So the completeness of the schedules is not administrative housekeeping. A form filed on time with a gap in it produces the same outcome for the affected expenditure as one not filed at all.
What to put in the engagement letter
Who files, by name and by role, rather than by firm. Deadlines fail in the gap between a consultant who assumed the accountant would file and an accountant who assumed the consultant had.
The date the consultant needs your information by, and what happens if it is late. And a working session booked before the deadline rather than a reminder sent near it. This is the one risk in the whole area with no remedy at all, so it deserves the most boring possible process.