CRA: Changed SR&ED Claim Form Requires Fee Disclosure

On October 31, the Canada Revenue Agency (CRA) announced changes to the Scientific Research and Experimental Development (SR&ED) claim form, which incorporates changes announced in the 2012 and 2013 budgets.

It will be in effect as of January 1, 2014. The current form T661(12) may be submitted until December 31, 2013. Three major changes are featured on the new T661(13) form:

1. A new Part 9 accommodates mandatory disclosure on the claim preparer and billing arrangement.
2. Comprehensive changes to Part 2 of the form to make it congruent with the consolidated policy documents released in December 2012.
3. Changes to accommodate the legislative changes from budget 2012 regarding eliminating capital and lease expenditures, a revised proxy rate to 55% and a revised base tax credit rate from 20% to 15%.

For tax practitioners preparing these forms, new information must be declared:

1. The name and business number of each claim preparer that has accepted consideration to prepare or assist in the preparation of the SR&ED claim;
2. The billing arrangement code for the claim preparer as described in Form T661 Part 9 in the list of billing arrangement codes;
3. The billing rate; and any other billing arrangement (if other than those identified under billing arrangement codes in the T661 Part 9); and
4. The total fee paid, payable or expected to be paid.

The CRA says its objective is to have the T661 form make non-compliant claims more easily detectable and thereby assist the program to run more efficiently. If information is missing or insufficient, a penalty of $1,000 may be imposed on the preparer.

Revised form T661 also incorporates the following changes initially announced in the 2012 budget:

• Parts 3 and 4 now have notations to advise that expenditures for capital property or the right to use capital property can no longer be claimed after December 31, 2013.
• The descriptions for lines 350, 355, 390, and 504 have been changed to reflect that expenditures for capital property or the right to use capital property can no longer be claimed after December 31, 2013.
• The description for line 820 has been changed to accommodate the 10% reduction in the prescribed proxy amount (PPA) for the number of days after December 31, 2013, in the tax year. As of 2013 the prescribed proxy amount (PPA) was reduced from 65% to 60%, and as of January 1, 2014 it is reduced to 55%.
• The base tax credit rate has been reduced from 20% to 15% as of January 1, 2014. The enhanced rate of 35% will continue to apply to qualifying corporations.

The eligible sub-contracting expenditures inclusion rate had been reduced from 100% to 80% in 2013 and this rate continues to apply going forward.