Peter Moreira wrote a great piece on Canada’s startup community about how some companies were walking away empty-handed from reviews about their SR&ED claim with the Canada Revenue Agency. Often, and this is especially true with software, founders will expect to get funding even though there is no basis for the “research” they have done in order to create an app or other product.
Some tips on how to approach a claim:
- Plan Ahead. It’s very important to find out if what you are doing will actually qualify, instead of jumping into the application process without doing the research first.
- Be Realistic. There are some great stories about how some companies have done very well with their SR&ED claims, but that may not apply to you. Have modest expectations.
- Remember Your Documentation. This is one of the most important aspects of any SR&ED claims, because it is what will substantiate any activity you have done to justify the amounts you will be applying for.
That third point may be the most important. For a software development venture especially, documenting research may seem like a tedious exercise. But Deloitte Partner Steven Carr said it could pay huge dividends beyond the SR&ED claim.
“Documentation also creates corporate knowledge,” said Carr. If a key developer leaves the company, the documentation should allow others to pick up where the former employee left off and continue with the project. It also can increase the value of the company in an exit because there is a record of developing the intellectual property. “It’s transformative knowledge once it’s written down,” said Carr. “
To see the original article on entrevestor.com, click here.