Along with the other changes that the CRA has been implementing over the past couple years, the Claim Review Manual has been updated. This is the manual that tells the CRA reviewers what processes they need to follow when reviewing an SR&ED claim. This review manual is meant to make the review process more consistent from review to review, and from reviewer to reviewer. It sets out clear guidelines as to what is to happen in a review, and what kind of timeline the reviewer should be following when working on a claim. The manual is also supposed to increase the co-ordination between the technical and financial reviewers, and to increase the communication quality between the reviewer and you (the claimant).

The CRA’s website has laid out the steps to a review, as listed in the CRA Review Manual. A brief overview follows:

1. Preparing and planning:
   • Reviewing your claim
   • Identifying issues with your claim (ie – areas they are unsure can be considered SR&ED)
   • Making first contact with you
2. Conducting a site visit:
   • Preparing for the review (the reviewer will contact you by phone or letter to discuss when the review will happen)
   • Preliminary review work (interviewing any possible staff involved with the SR&ED work, explaining the SR&ED program, etc)
   • On-site review (tour of the facilities, interviewing staff involved in the SR&ED work, reviewing supporting documentation)
   • Request for more information to be sent to the CRA reviewer
   • Communication of preliminary decisions (if possible, the reviewer will let you know what kind of results to expect from your claim submission)
3. Finalizing results:
   • SR&ED review report (prepared by the CRA for you, to allow you to review it and provide any new information if you disagree with their assessment)
   • Finalization of technical and financial reports (these reports will be sent to you by mail, be delivered in a meeting, or discussed over the phone)
   • Dispute resolution (if you disagree with the CRA’s final report)
   • Appeals process

In 2008, quite a number of changes took place regarding the SR&ED program.  For one, the CRA hired a slew of auditors for SR&ED, increasing the likelihood that a technical and financial reviews will take place, no matter how solid the claim. For some businesses, especially first time claimants, this has proved to be daunting in attaining a significant return.

It is now more important than ever to have strong, solid, properly documented projects and to know one’s way through the maze that is the new T661 forms.  When it comes to describing project activities, you are now limited to 1400 words as opposed to a full twelve page narrative.  If the necessary requirements of technological uncertainty and advancement are not adequately supported, claims run the risk of being rejected, or at least of having certain activities disqualified, thus reducing the size of any return received.

Fortunately for rejected claims, if the 18 month period after fiscal year end claimed for has not expired, an objection can be submitted to the CRA within 90 days of receiving the notice of assessment.  if you feel that your project does in fact meet SR&ED requirements, it may very well be worthwhile to pursue an appeal.  The CRA outlines the appeals process on their website at:

http://www.cra-arc.gc.ca/txcrdt/sred-rsde/pblctns/p2000-02r-eng.html#tphp

All in all, the hassle of submitting objections and pursuing an appeal is time consuming.  This can be avoided altogether with the use of a consulting expert.  An experienced SR&ED consultant assess projects and handle the filing for you can be extremely valuable.  In addition, should claims be called to review, Northbridge Consultants readily will accompany you to the CRA review location.  While it is necessary that you attend and represent your projects, Northbridge provides assistance in the defense of any activities or documentation that may be disputed by the auditor.

As of June 27, 2006 the federal government announced it has put more on the case! The case of course is the SR&ED Tax Credit Program. Federal Budget Commitments have increased funding for the programs capacity and level of service to claimants. This is good news for claimants and consultants alike. There have been calls for changes to the overall program for a while now. The CRA admittedly by its’ actions have not done a great job in publicizing the program to Canadian business. Since the fall of 2007 they have been working on an action plan to make the SR&ED program more effective. The 3 big areas they targeted are a simplified guide and claim form, development of a self–assessment for eligibility and a review of policies and procedures. The goal is to improve consistency and predictability and quality of the claims process. This announcement is to follow up the changes to the SRED Program 2007-2008 from the beginning of the year. To see the status of the Small Business Action Plan go to http://www.cra-arc.gc.ca/taxcredit/sred/whatsnew-e.html