Yes, a claim for Scientific Research and Experimental Development (SR&ED) may be retroactively examined by the tax authorities. In Canada, this is often done by the Canada Revenue Agency (CRA).
For instance, the CRA can choose to audit or examine a company’s SR&ED claim after it has been submitted. Retroactive reviews can happen for a number of different reasons. The purpose of this evaluation is to confirm that the stated activities comply with the program’s eligibility requirements and that the claimed expenditures are true.
The CRA may ask for more information, proof, or justifications to back up the reported activities and expenditures during a retroactive examination. In order to confirm the accuracy of the material in the claim, they might additionally conduct interviews or site inspections. The CRA may refuse or amend the reported expenses and credits if they find that the claimed activities do not fit the program’s requirements. This could result in the company incurring more taxes or having to reimburse previously issued refunds.
To support their claims in the event of a review, businesses should keep complete documentation and records of their SR&ED activities and expenses. Working closely with tax experts who are familiar with the SR&ED program is advised if a company is chosen for a retroactive review in order to ensure compliance and correct portrayal of the claimed activity.
