Tech startup accountant in Kelowna

For a one-owner Kelowna tech startup, monthly bookkeeping, payroll and the year-end T2 with statements usually cost from $500 to $700 a month all-in. The year-end covers the T2 with Schedule 1 and Schedule 50, the CCA schedule, the small business deduction, T4 or T5 slips for the owner’s pay, and the instalments for the year ahead.

SR&ED is claimed on Form T661, from records kept at the time

The scientific research and experimental development program pays for systematic work on a technological uncertainty. Building with known tools and methods usually does not qualify, however hard. Testing whether an approach can work at all, when a competent developer could not know, often does. So the claim needs the uncertainty, hypotheses and results, not just salaries.

The claim is filed on Form T661 with the corporate return, under a strict deadline the CRA does not extend, and draws closer review than most items. Records made during the work survive review: tickets, commit history, design notes and time by project. We tag salaries and contractor costs to projects from the first month, because rebuilding that later is where claims shrink.

The enhanced refundable credit, and the status that unlocks it

A Canadian-controlled private corporation can earn refundable SR&ED investment tax credits at an enhanced rate on qualifying expenditures up to an annual limit. A startup with no taxable income gets the credit in cash after assessment, often its largest early source of non-dilutive funding. See the SR&ED expenditure limit update.

The enhanced rate depends on CCPC status, which a financing round can end: control by non-residents or a public corporation, directly or through rights to acquire shares, removes it. Associated companies share the expenditure limit too. The cap table is a tax document; have a CPA review a term sheet before signing.

Grants reduce what the SR&ED claim is based on

Government assistance for the same work, whether a federal research grant, a provincial program or a wage subsidy, generally reduces the qualifying expenditures for the SR&ED credit, as can certain customer-funded contract payments. The programs are neither alternatives nor additive. Claiming full salary for SR&ED when a grant paid part of it is a common reason claims are reduced.

We record each grant against its project and period, so the reduction and the grant itself are reported correctly. For cash planning, counting on both the grant and the full credit counts some money twice.

Stock options for early employees

Options help startups hire developers they cannot yet pay market salaries. For a CCPC, granting an option creates no tax, and the benefit on exercise is generally deferred until sale, possibly reduced by a deduction. The benefit goes on the employee’s T4 in the year it is taxed, and the plan, grant records and share register must agree.

Founders face the other side. Qualified small business corporation shares can be eligible for the lifetime capital gains exemption on a sale, if the company meets the tests beforehand. Keeping surplus cash and investments out of the operating company, often via a holding company above it, protects eligibility.

GST and PST on software sold everywhere

A Kelowna SaaS company charges GST, or HST in harmonized provinces, based on where the customer is. Services and intangibles supplied to non-residents are often zero-rated exports, hence large early GST refunds. BC PST applies to software, including electronic delivery, so BC sales can require PST registration. US-dollar revenue adds foreign exchange gains and losses. GST on exports and non-residents and the BC PST guide cover the rules.

Founders who brought the company with them

Many Okanagan startups were founded elsewhere. An Alberta or Ontario company whose founders now work in Kelowna may have a permanent establishment in BC, which shifts income allocation. Some founders move the corporation; bringing a corporation to BC explains how. A remote contractor who works only for you, on your schedule, may be an employee whatever the agreement says; the worker classification tests apply to software as to construction.

What is covered

A Chartered Professional Accountant handles the whole file:

• T2 corporate return and year-end financial statements
• SR&ED claim on Form T661, with project-tagged bookkeeping behind it
• Grants recorded against the projects and periods they fund
• Stock option and share records reviewed for tax reporting
• GST, HST and BC PST registration and filing
• Payroll for a growing team, including option benefits on T4s

Remote, and there is no Kelowna office

EverStone has no Kelowna location. The work runs online by video, e-signature and secure upload link, as most software teams already work. For owners moving from a bookkeeper to forecasting and investor reporting, fractional CFO support starts from $2,750 a month.