Canadian Tax Adviser
March 2010

CRA Continues to Accept "Old Form" SR&ED Claims

Bob Waterworth
Research & Development, Toronto

Dave Armstrong
Canadian Tax, Fredericton

If your  company has more than 20 scientific research and experimental development (SR&ED) projects, you can continue to provide information for only your 20 largest projects in Part 2 of Form T661, “SR&ED Expenditures Claim,” until further notice.

This extension, which was announced in a revised Application Policy the Canada Revenue Agency (CRA) released on February 4, 2010, gives claimants more time to adapt to the new requirement to submit Part 2 of Form T661 for all projects claimed instead of only the 20 largest projects in dollar value, as in previous years. R&D tax credit claimants must still maintain in their records the required information for all projects claimed, not just the 20 largest.

Background
Under the old version of the form, a company was required to attach a separate description and respond to five questions regarding each project. Large companies with multiple projects were only required to detail their 20 largest projects. This version of the form may be used for taxation years ending in 2008 or earlier.

The new version of the form requires project descriptions to be inserted in the form itself rather than attached separately. For each project description, a company is required to respond to only three questions, and the length of each response is limited. This new form, which was first issued on November 10, 2008, was to be used for taxation years ending after 2008.

In January 2009, the CRA issued an addendum to the Form T661 questions and answers that provided guidance on how to file during the transitional period between the "old" and "new" versions of the form.
In June 2009, the CRA revised its Application Policy and allowed claimants to continue to provide information in Part 2 of Form T661 for only their 20 largest projects for tax years ending before 2010.

Revised policy
Effective immediately, claimants can continue to provide information in Part 2 of Form T661 for only their 20 largest projects, until further notice. However, claimants must ensure that they maintain, at their place of business, complete Part 2s of Form T661 for all projects claimed and not only for the 20 largest projects. The CRA may request some, or all, of the remaining Part 2s at a later time. Failure to provide this information will result in the disallowance of the expenditures claimed for the project as SR&ED expenditures.

For more information, contact your KPMG adviser.

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