After you’ve filed your SR&ED claim, there is a bit of a waiting period before you will hear back from the CRA. When that waiting period is done, one of two things may happen – you may hear that your claim has been Accepted as Filed, or the CRA may ask to review your claim with you. There are two different types reviews that can happen: the technical review and the financial review. You may be asked to have one, the other, or both types.

The technical review will look at the SR&ED work that you’ve done, in order to confirm that your projects are eligible. The reviewer will be looking for obstacles, will be looking to see that some sort of advancement in your knowledge has happened, and will be looking to see that you have the documentation to support the obstacles and advancement.

The financial review will look at all of your financial information involved with your SR&ED claim, in order to confirm that you have claimed the correct costs for each project. Again, you will need the proper documentation to support the financial information.

Some consultants and accounting firms shy away from CRA reviews. Some do not guarantee that they will be present with you when your review happens. Northbridge embraces the CRA review for a couple of reasons:

Firstly, especially if this is the first time that you are claiming, the CRA reviewers want to meet with you to make sure you understand the SR&ED program.

Secondly, if a review isn’t requested it is usually because you have claimed less than you could be eligible for.

One last thing to make note of in regards to CRA reviews – having a CRA review does NOT meant that you will get a tax audit. The SR&ED division of the CRA works separately from the tax division, and no information is passed on to the tax division from your SR&ED claim.

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.

It will now be easier for small businesses to file for SR&ED!

In 2007, the Canada Revenue Agency (CRA) consulted with Scientific Research and Experimental Development (SR&ED) claimants, members of the Action Task Force on Small Business Issues, and internal stakeholders. Based on these consultaitons, a new T661 form was devised in order to streamline the SR&ED filing process.

The new T661 was released on November the 10th:

• New T661 Form
• Guidelines for New T661 Form
• Q&A About New T661 Form