T661 (13) Part 9 Claim Preparer Info: An Unfair Disclosure?

October 3, 2014 SRED

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In 2013, the Canada Revenue Agency (CRA) introduced a new T661 form for Scientific Research and Experimental Development (SR&ED) expenditure claims. One of the more high-profile changes was the addition of the Part 9 — Claim Preparer Information.

Required SR&ED Claim Preparer Information: Then and Now

Prior to the release of the 2013 Canadian federal budget, taxpayers were only required to provide “limited information to the CRA about the external consultants that prepared certain parts of their SR&ED tax incentive program claim” (Budget 2013 – SR&ED Tax Incentive Program). Claimants had to disclose details about their accounting/financial preparer(s), but not about individuals or groups who prepared the technical/scientific narrative portions of the SR&ED claim.

As of January 1, 2014, Part 9 requires claimants to provide more detailed information about their SR&ED claim preparers:

Name of claim preparer;
Claim preparer business number;
Billing arrangement code (list of codes is included on the form);
Billing rate (percentage, hourly/daily rate or flat fee);
Other billing arrangements;
Total fee paid, payable or expected to be paid

The CRA no longer distinguishes between types of claim preparers — be they internal, external, financial, technical, or scientific in nature. Claimants must submit this information for each and every SR&ED claim preparer.

Confidentiality, Liability and Penalty

Confidentiality

Claimants and claim preparers alike have expressed concern about the sensitive nature of information required in Part 9. As noted by SR&ED authority Elizabeth Lance, requiring SR&ED claim preparers to reveal their fee structure increases their vulnerability to audit groups and complicates non-disclosure agreements between claimants and preparers, among other potential issues. (TechVibes.com – The SR&ED T661 (13): The Good, The Bad and the Ugly).

In response to confidentiality concerns, the CRA introduced the Revised optional filing measure for Part 9 in May 2014. This filing measure requires claimants to submit Part 9 along with their claim, but omit billing and rate information about their preparer(s). The claimant must also submit Parts 1 and 9 of the T661 directly to their local tax centre when they file their claim, including billing and rate information about their preparer(s).

Liability and Penalty

Both the claimant and the claim preparer(s) may be considered liable if the information in Part 9 is improperly filled out. Claimants in particular may face a penalty of $1,000 for any inaccurate or incomplete information. Yet it should be noted that taxpayer relief provisions may be available in certain instances, including so-called “extraordinary circumstances,” such as the inability to pay the penalty.

Additionally, the new filing rules stipulate that claim preparers may be exempt from any penalties or liability if it can be proven that they “exercised the degree of care, diligence, and skill that a reasonably prudent person would have exercised in comparable circumstances.”

An Unfair Disclosure?

What are your thoughts on the new information disclosure requirements in the T661 (13) form, Part 9 — Claim Preparer Information? Is it an added paperwork nightmare? Does it create more transparency within the SR&ED program? Is it unnecessarily singling out claim preparers?