In late 2024, the Canada Revenue Agency (CRA) introduced a new program in an effort to better support businesses in their applications to the Scientific Research and Experimental Development (SR&ED) program. The program is called the SR&ED Pre-Claim Workbook, and it has been integrated into the “My Business” account of the CRA portal. The goal of the workbook is to help businesses fill out their T661. It does so by providing prompts and questions that help the user answer the required three technical questions as well as the financial data for the T661 form. This tool can be very useful for small businesses new to SR&ED and with relatively small and simple SR&ED claims. It helps businesses who want to file their claim without the support of an SR&ED consultant but would like some support in filling out the T661 form.
This blog will review the new CRA SR&ED Pre-Claim Workbook Portal, explain how to use the tool and provide further tips and advice for how to file your own SR&ED claim with this tool.
What Will You Need Before You Start the Workbook?
This workbook is designed to help you tailor the answers to the technical and financial questions in the SR&ED form T661. If you are very new to SR&ED and you are unsure of what work qualifies, how to separate your work into projects, or how to adequately explain your projects through the lens of SR&ED, you should consult an expert. If you would like more information about how to understand SR&ED and maximize your claim, read our blog about SR&ED optimization here.
To use this workbook, you need to already have a strong sense of what projects are eligible for SR&ED and what exact aspects of the projects are eligible. If you have all of this information, then you need the following details to accurately work through this exercise.
Project information
- Title of project(s)
- Project(s) start and end date(s)
- Tax year start and end date (one per Workbook)
- The purpose of the project, what work was done, and what advancement or new knowledge was gained from your work
- The data or feedback you collected
Expenditure information
- Salary or wages for employees directly engaged in the SR&ED
- Cost of materials
- Cost of contractors conducting SR&ED on your behalf
- The calculation method you would like to use to calculate your expenditures
Regarding the calculation method, we almost always recommend the Proxy method, but both methods are discussed in the further context below.
Accessing the CRA’s New SR&ED Pre-Claim Workbook
The workbook is accessed through the “My Business” account, you can access it regardless of if you are the account owner, or if you use the “Represent a Client” process to access the business account. Once you are in the account, go through the side menu to “Corporation Income Tax”, and then select your corporate income tax account number.
Once you are in the corporate income tax account, select “SR&ED” on the menu bar. You can learn more about SR&ED here if you are applying for the first time, otherwise, scroll down to the bottom of that page and select “Launch SR&ED Workbook” under the “SR&ED Pre-Claim Workbook” as shown below.
In the same way the SR&ED program corresponds with your business’s tax year, the workbook does too. It can include up to three projects per year. If you have more than three projects we recommend completing the first three, saving the information and then deleting the projects and going through the same steps with any additional projects.
Once you’ve created a new workbook for the last day of the tax year in which your SR&ED project falls, you can then set up the project and begin. You can start with either the project description portion, or the financial portion, but we would recommend the project description first as it will bring clarity about what to include in the financial section.
Using the Workbook to Create Your SR&ED Project Description
The goals of sections 2, through 4 are to answer the technical questions in form T661. Section 2 addresses line 242: What scientific or technological uncertainties did you attempt to overcome? (350 words max). Section 3 addresses line 244: What work did you perform in the tax year to overcome the scientific or technological uncertainties described in line 242? (700 words max). As well as section 4 which addresses line 246: What scientific or technological advancements did you achieve or attempt to achieve as a result of the work described on line 244? (350 words max).
The process is rather intuitive, there are questions such as “Describe your business and provide some background on your regular commercial activities.” If you are unsure where to start or how to answer it, select the “I want to see prompts to help get me started” button and further prompts such as “We produce/process/provide products or services in … since …” or “Our market is …” pop up to help you provide a strong answer to the question. I would strongly recommend answering multiple prompts to provide adequate information and a well-rounded answer to the question.
Once you go through each of the questions, using the prompts plus additional details to generate high-quality answers, all of the answers for that section are combined to be the answers for lines 242, 244 or 246 respectively in the T661. We strongly recommend you copy that answer into a Google Doc or Word Doc to review, edit, improve the flow and provide more context. The workbook even provides a warning that states “Review and edit your response for completeness. You are required to provide your own details on the work you want to claim. Simply using the prompts will not be considered a complete answer.”
For Section 5, Supporting information, it is completely unnecessary for you to attach any of your files. It is good practice to review all of your documents to have a strong understanding of what information you have regarding your projects, but there is no benefit in attaching them here.
Using the Workbook to Create Your SR&ED Project Expenditures
For the financial sections (6 and 7), it is crucial that you already have a clear understanding of what expenses are eligible for SR&ED pertaining to this specific project. If you are unsure, we would recommend reviewing the CRA’s definitions of what work is eligible. This workbook is a good way to help you understand which lines of the T661 to fill in, but it does not do any analysis, checks or calculations beyond that, so you need to be sure your numbers are correct.
It is important to understand the difference between the Proxy and Traditional calculation methods. We recommend using the Proxy method for calculating SR&ED in almost all circumstances. This method calculates overhead and other expenditures as a percentage of your salary base, making it the most commonly used and simpler option. On the other hand, the Traditional method requires you to calculate all overhead expenditures that are directly related to SR&ED activities and provide detailed supporting documentation. This method can be complex and time-consuming, requiring detailed records and explanations of how the amounts were determined. For most businesses, the Proxy method offers a straightforward and efficient solution.
Once you have selected all of the eligible expenses that you have for the specific project, you simply have to go through the steps and provide the required details about your expenses. Make sure you understand the difference between materials consumed and transformed, as well as arm’s-length versus non-arm’s length contractors versus third-party payments. If you have questions about the nuances of your claim, or if your project is more complicated, please reach out to us at GrowWise, we are more than happy to answer questions or support you with your SR&ED claim.
Output of the CRA’s SR&ED Workbook
The result of all the work you have entered into this workbook is a summary page, where you have to copy the information into the form T661. Unfortunately, the CRA did not design the functionality to automatically populate the SR&ED forms so this process is rather manual. The value of this workbook comes from the prompts and questions it asks you in the project description section, to help you create strong answers to the project questions.
From the summary page, you can also request a “Pre-Claim Consultation” if you want to discuss your project with the CRA to ensure it qualifies ahead of submitting your claim. This process often takes months, so we would recommend giving the CRA quite a bit of time ahead of your SR&ED due date (which is 18 months after your tax year-end) if you want that consultation.
Advice For Using the CRA’s Workbook to Create The Strongest SR&ED Claim Possible
We recommend paying close attention to the word maximums. The question for line 244 “What work did you perform in the tax year to overcome the scientific or technological uncertainties described in line 242?” has a 700-word max, therefore this is the answer that should by far have the most detail, and really get into the nitty, gritty of your SR&ED project. There is rarely such a thing as too much detail when it comes to defending the technical merits of your SR&ED projects. The most common reason that claims are denied is for lack of technical merit, meaning that even if your project does address the required technical or knowledge uncertainties, if you cannot clearly articulate, and detail the actions that you took to address that uncertainty, your claim could be denied.
Be confident in your project division. If you are unsure how to divide your projects, this workbook will not be useful for you, as you already have to have a strong understanding of how you are dividing your projects ahead of using the workbook. Projects should be grouped based on the specific scientific or technological advancement that the work aims to achieve. Projects can be grouped together that technically fall into different business projects, as long as those projects all aim to address the same knowledge gap.
Don’t forget to include details about your failures. The word “unsuccessfully” is a green flag within the SR&ED world. You want to draw attention to the work and effort your team spent trying to solve a problem. If you solved that problem on the first go, it is difficult to justify that the project is eligible for SR&ED. The whole goal of SR&ED is to support innovative work that takes time, energy and resources to iterate, improve, and solve. So for the answer on line 244, dig deep into the trials, tests or theories that didn’t work out, and what you learned from those mistakes.
If your project spans multiple tax years, involves non-arm’s length contractors or complex third-party payments, or is nuanced in a way that the workbook has a difficult time encompassing, that is a good sign that you should consult an expert. Reach out to contact@growwise.ai if you have SR&ED questions or want support in creating your SR&ED claim.
