Look for These Four Cues When Hiring a SR&ED Consultant
5 min read
5 min read
Whether you want an expert opinion or you simply do not have the resources to address complex tax incentives internally, a SR&ED consultant provides you with an opportunity to maximize government funding, while staying focused on your business.
However, how do you know which consulting firm is right for you? What should you look for when seeking expert advice?
Here are what we consider to be the top four characteristics of a good SR&ED consulting firm.
Finding a SR&ED consulting firm with the kind of background you are looking for may seem like a simple enough task, but increasingly, clients are looking for firms that provide a differentiated but effective service offering that matches their objectives.
This makes consulting firms that have their finger on the pulse of emerging technologies and have the in-house capability to respond to those trends a highly favorable option.
In addition, tax rulings related to the SR&ED incentive change yearly. Rates can fluctuate, precedent is constantly set by rulings established in legal cases, and eligible R&D costs are periodically revised.
To this end, having a broader understanding of the tax incentive makes a SR&ED consulting firm likely to suggest low-risk solutions from a technical perspective.
You should always ask about who they have worked with, which industries they specialize in, and how successful previous projects were. A good KPI is their success rate – the number of successful claims over the number of claims submitted. You should expect nothing less than 90% success. Anything less, you may run the risk of being audited and/or outright rejected by the CRA by association.
Always make sure that the firms you meet with can refer you to past clients who can confirm a successful claim. References will help you determine which SR&ED consulting firm can address your needs more efficiently.
Download our guide on using SR&ED to fuel growth
The cornerstone of any good consulting firm, SR&ED or otherwise, is the ability to understand the client’s overall business and provide appropriate advice accordingly.
In the context of SR&ED and government funding, a good indication of whether a consultant can truly help you is measured by the questions they ask during your first few meetings. Beware of SR&ED consultants that tell you exactly how much money they can save you without performing a thorough examination of your business.
To properly validate eligible SR&ED projects, the consultant must consider your corporate structure, payroll, and the technical validity of your research and development – information that isn’t readily available in the first meeting.
For multinationals, international tax law must also be taken into consideration. Transfer pricing can play a crucial role in determining a company’s optimal credit rates. A SR&ED consultant needs to be well versed in international tax legislation to ensure the corporation is maximizing their overall credits.
There are many other government incentives that fund innovation. IRAP, for example, is Canada’s most competitive grant available to companies pursuing projects with high levels of technical uncertainty. Your SR&ED consultant should be up-to-date with relevant programs, stack as many programs together, and steer you in the direction that is most aligned with your overall business objectives.
Furthermore, while it may seem tempting to have an aggressive maximization strategy, this increases your odds of being audited in the long run. SR&ED consulting firms who do not assess funding opportunities on a long-term basis may set you up for an unwelcomed audit, or even worse, an outright refusal of your claim.
Audit or refusal of claims can have rippling effects on your team’s productivity in the short-run and increase your risk of being audited in subsequent years. That’s why a SR&ED consultant who can see the full lifecycle of government funding will help you streamline the claim process.
SR&ED consultant search and selection is a lot like dating or marriage. Compatibility does not just include shared history and objectives but incorporates how well you click and your ability to speak each other’s language.
Personality clashes or a misalignment of business styles can all lead to poor performance and stressful communication between a SR&ED consulting firm and a client.
One way to safeguard against any mismatches is to open channels of communication before, during, and even after engaging a SR&ED consultant.
One of the more difficult aspects of the consultative process is determining an agreed-upon fee structure that benefits both parties.
Within the context of SR&ED, the tax incentive can sometimes be the single source of cash flow for the company. If consulting fees are too stringent, the tax credit becomes less effective. This is especially true for pre-seed or seed tech startups. Love money, personal savings and an initial round of funding are often fully allocated to salaries, and it can be difficult to accommodate a SR&ED consultant if their fees are too high.
A good SR&ED consultant understands the reality of growing tech companies and seeks to build a long-term relationship with them. Oftentimes, during the first year of the engagement, there may not be any eligible work, but the SR&ED consultant will train and support the client with best practices, so that an defensible claim can be submitted later on.
If you have questions or comments about our SR&ED services, please do not hesitate to contact Sahar Ansary at 1-800-500-7733 for more information.
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