In the past couple of years, the CRA’s scrutiny level in SR&ED eligibility audits has increased to a great degree. Therefore, you’ll have to be overly prepared (unlike most cases, being “overly” is a good thing here) and precise in your documentation, without any discrepancy. Each SR&ED project varies from another in terms of outcomes, and there is no one-size-fits-all strategy that can be blindly adopted to ensure a successful CRA review. However, being mindful of certain important factors can go a long way when it comes to having a better control of the information flow during the meeting with the reviewer, leaving no scope for misunderstandings.

Have a Streamlined Plan in Place

It’ll really help if you have a thorough, formal process to determine, capture, and document the different SR&ED projects, costs, and activities. You’ll need to:

• Ensure that your plan explains the technological uncertainties at the appropriate level and clearly separates it from everyday development activities. This is, however, easier said than done because in most cases, the uncertainty is either too vague or explained in such a manner that it almost looks like a routine.
• Ensure to conduct a due diligence and settle on a baseline for technology. During the CRA review, the auditor will utilize his/her resources to determine if a solution to your uncertainty is already available or public knowledge. In case it’s related to what is already known, your claim is more likely to be denied.

Strong Documentation is a Must

It is extremely important to organize the documentation flow in a way that reinforces your eligibility aspects of the SR&ED project. Instead of collecting binders and binders of random technical documents, it would be far more fruitful if you can organize the documentation in a consistent manner, starting from the due diligence work, testing and analyzing to the existence of a technological uncertainty and recording of advancements. Before you start telling the auditor about the tests which were conducted, the auditor would like to know the business context (what prompted this SR&ED project) and how it is linked to your specific field of expertise. Keeping a record of the due diligence activities is equally imperative, and involves detailing all the research you have undertaken, gathering feedback from your clients/suppliers and outlining the testing you may have performed in the initial stages.    

Connect the Dots

The significance of maintaining an uninterrupted flow while presenting information to the reviewer cannot be stressed enough. Connect the dots, describe in clear language how the activities and tests relate to uncertainties, how the documentation is connected to various testing methods, and how certain costs are derived from certain activities. Many auditors ask the claimants in RFIs (Requests for Information) to organize tables connecting uncertainties, tests, advancements and documentation. This is indeed a good practice which makes it easy for the reviewer to get a picture of your project in its entirety.  

Re-assess Uncertainties Technology-wise

When you receive confirmation on the CRA review, it’s high time that you re-read the initial submission and evaluate whether or not the uncertainty lays more focus on the business/product level than the underlying technological strategy. Make sure you understand that an uncertainty goes way beyond knowing the answer to these simple questions: Can you achieve a given objective, or whether or not something can work? An uncertainty happens when all the available options have been exhausted, and still there remains a gap (technological) that makes it impossible to move forward the project.   

Know How the Auditor Will Assess You

In most instances, the CRA reviewers perform a thorough internet search of the organization, technology and competitors to have a gist of what is a standard practice in that specific area of business. Prepare yourself well for this, by looking at the claims made by suppliers and competitors on their respective websites, and learn how to differentiate your efforts from what is advertised on the internet.

Don’t Hesitate to Present Your Point When Required

The CRA reviewers have certain time limits for each project to comprehend its complexity. So, your face-to-face meeting with the auditor is the perfect time when you can present the merits of your SR&ED project and ensure that he/she thoroughly understands the scope of your project. If you feel, at any time during the review, that the auditor is hesitant or undecided, address it right then. Moreover, make sure your key technical person who knows in-depth about the company’s development work, is at the meeting to confidently tackle any questions the reviewer may have.

Know Your Rights

If you have some concerns about the way the review was conducted or about the final outcome, you can contact the CRA reviewer and manager. In certain cases, you can also request an Administrative Second Review, but make sure you do it before the final report is finished and the file is closed. Moreover, the CRA also facilitates an option to file an appeal through a Notice of Objection to deal with situations when the claimant believes that certain facts were misinterpreted in the review, or the law was not applied correctly.  

All in all, the success of CRA SR&ED reviews largely depends on the support documentation and how well it explains the project. CI Solutions’ experts have a vast knowledge of how to navigate through complex SR&ED projects and can guide and assist you in the process.

Contact CI Solutions today!