To gain funding from the Scientific Research and Experimental Development program and to make a claim, one must correctly file SR&ED forms with the Canada Revenue Agency. This includes Form T661 Expenditures Claim.

In some cases, incomplete forms can be a reason for being denied SR&ED tax credits. Further information will be requested to access your application if your complete the forms. That’s why you should always ensure your SRED application is filed correctly.

Here is everything you need to know about SR&ED forms:

Form T661

Form T661 is designed to provide all the technical information about your SR&ED project and calculate SR&ED expenditures related to investment tax credits.

Form T661 – Part 1

As you will find in filling out various sections of Form T661, it is simple. Part 1 is all about general information for your corporation, including who is involved, your business number, and contact information. For an individual applying for SR&ED and making a claim, there won’t be many differences in how T661 will be filled out. An individual will enter their social insurance number instead of a business number.

Form T661 – Part 2

For every SR&ED project, a separate Part 2 must be completed. Part 2 details information, including the project start and end date and project descriptions. In the project description, an applicant must be clear about what scientific or technological uncertainties were encountered, what work was done to overcome these, and what scientific or technological advancements were achieved if any.

Form T661 – Part 3

In this section, you will calculate your allowable SR&ED expenditures to the nearest dollar and identify what method you used, i.e. the proxy method or the traditional method. You will identify salaries and wages, costs of materials consumed or transformed in performing SR&ED, contract expenditures, and third-party payments, if any.

Form T661 – Part 4

Part 4 calculates what ITCs you are eligible for based on qualified expenditures and deducting government assistance and other non-eligible costs.

Form T661 – Part 5

Part 5 is used to calculate the prescribed proxy amount (PPA). If you have chosen the traditional method to calculate your expenditures, you do not need to fill this section. This is only for applicants who have used the proxy method.

Form T661 – Part 6

Part 6 lists the total costs across all SR&ED projects claimed in the tax year, based on information written elsewhere in your SR&ED form.

Form T661 – Part 7

Part 7 is designed for any additional information you may need to include. It involves the distribution of the budget for SR&ED work between parent companies or affiliates, federal contracts, internal, and others. One must also identify the number of personnel involved, i.e. scientists and engineers, technologists and technicians, managers and administrators, and technical support staff.

Schedule T2SCH31

To claim investment tax credits or ITCs, one must file the additional Investment Tax Credit form. For corporations, this is Schedule T2SCH31, and for individuals, this will be Form T2038(IND). In addition to Form T661, these forms can be downloaded directly from Canada.ca and printed off or filled in digitally.

SR&ED Technical Narrative

In filling out your SR&ED forms, you will be tasked with describing your SR&ED project. This should relate to the eligibility criteria. As there is a word limit, be clear about what you want to say in the technical narrative.

Be sure to demonstrate what the hypothesis was based around, how to address the uncertainty, experiments performed to test the hypothesis, how test results were analyzed, and what conclusions were found.

Scientific and Technological Advancements

Many applicants are accustomed to focusing on marketing and the commercial aspects of the business, but the CRA is not interested in that. They only want to know about a project’s scientific and technological aspects. In your claim, focus on science and technology, and disregard any commercialization language.

Schedule T2SCH31

After T661 is written, the next step is to fill in T2SCH41. This schedule specifically relates to federal ITCs. Investment tax credits will differ from applicant to applicant. CCPCs, for example, can receive up to 35% in ITCs, while foreign-owned corporations are limited to 15% in ITCs.

ITCs are also calculated based on income, with all amounts above $3 million in SR&ED expenditures, seeing a rate of 15% in ITCs.

SR&ED Applications

Always double-check everything you are self-filing your SR&ED claim. You don’t want major spelling or grammar mistakes and fields left blank or incorrect information that does not correspond to other parts of your form or other tax information you’ve submitted.

The CRA will cross-reference everything, and it all must line up. If your claim is flagged, that will only extend the work required to submit an SR&ED claim.