There are many doctors and medical companies, including clients of SR&ED Unlimited, that have successfully made Scientific Research and Experimental Development (SR&ED) claims and received credits or refunds as part of this tax incentive program.
Though the CRA always seems to be tightening up (or making more confusing) the criteria for what SR&ED claims they will accept and what they will not, the program as a whole still gives hundreds of thousands of dollars total for qualifying claims. It is still worthwhile to file a SR&ED claim, but there is a critical challenge for doctors and medical companies, not just to understand what is claimable, but how to document and file a claim.
That’s where consulting firms like SR&ED Unlimited come into the picture. We want to share with you seven things we understand from our experiences helping doctors and medical companies successfully file their SR&ED claims.
1. Is it worth it? You bet it is!
If you’re a doctor, consider what compensation you would normally get for research. The research process is where you often take a hit in terms of cash flow, if you earn most of your income through clinical fees. Yet you may be paid/paying yourself a salary during that time spent, in which you are on the hook for all the hours spent. The SR&ED program allows you some compensation for that time.
2. What’s one helpful part of making sure a doctor’s work would qualify? Incorporation.
As in all SR&ED, there must be research occurring which the doctor (as a clinical researcher) is qualified to perform. But it’s also important that either the doctor is paid through a medical professional corporation, or is otherwise incorporated.
3. How similar are medical research SR&ED claims? There are key similarities.
The format of the SR&ED claim is the same as any other company such as a manufacturer or software developer. There are similar parameters to what constitutes acceptable documentation in the eyes of a CRA auditor. What’s more complex is determining the claimable expenses, since the world of medical research can be a convoluted one. Grants, partnerships with universities, questions of intellectual property; it’s extremely helpful to hire a consultant who has navigated these waters before.
4. What’s the most common challenge in a medical SR&ED claim? Avoiding double dipping.
As we mentioned in the previous answer, there are government grants that may already be compensating you for medical research, and you may not be able to claim any part of that money twice. There are also intellectual property issues, and making sure that the project you claim couldn’t possibly be claimed by a partner company or researcher (another kind of double dipping which can happen by accident when intellectual ownership isn’t clear). A good consulting company will ask their client important questions to make sure such situations are clarified before they ever become a problem.
5. What constitutes “acceptable documentation”? This changes, but…
With medical research, as in all other fields of SR&ED, it might actually be impossible to have documentation exactly the way the CRA would like it. Especially when researchers are more often focused on the research process rather than on documenting and dating every exact step of the process. However, experienced consultants will brief their clients about documentation, asking what processes are currently in place and suggesting any reasonable improvements to a documentation system where necessary.
6. How else can a consultant help a medical researcher? Through planning and strategy.
There are ways to optimize the time spent creating documentation, so that there doesn’t have to be a mad scramble once it’s time to formulate the SR&ED claim. Great consultants have ideas for processes that can be used year-round, properly identifying projects that qualify for SR&ED and documenting them as each project goes without disrupting the company’s productivity or efficiency.
7. Are there penalties for filing SR&ED claims that don’t qualify? Not really.
Your claim can be audited by the CRA on a couple of levels: financial and technological. In any case these are the two worst things that can happen if you file a SR&ED claim. Your claim amount could be reduced by a CRA auditor, in which case you receive less of a refund than you expected. And your claim could be outright rejected. This will not lead to an actual full-scale tax audit of your company, it is just a matter of whether or not the CRA accepts your SR&ED claim—and if they do, whether they accept it completely.
SR&ED Unlimited has experience consulting with incorporated medical professionals and medical research companies. If you are not sure whether what you are doing could qualify, or you have other questions, just send us a message or give us a call.