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SR&ED Tax Credit – What To Expect From The CRA

Dealing with the CRA

The SRED program is administered by CRA because it is the Income Tax Act of Canada that gives the program its authority.

Our experience is that dealing with the people in the SRED sections of the various CRA offices is routinely pleasurable. The culture seems different from what we have observed in some other sections.

We have no fear of a SRED audit. First, the audit can be useful to helping all people concerned to understand what is eligible and how to apply the law to the taxpayer’s benefit. Second, we have not experienced that CRA SRED auditors are aiming to reduce the claims. Basically they seem to want mainly to make sure that the claims are prepared in a fashion that reflects an accuracy born of knowing the rules. SRED audits are educational experiences.

One of the reasons for this CRA attitude is that the governments behind the SRED credits have instituted them as an economic policy. In fact, the taxation on the SRED receipts plus the taxation of the jobs created by the SRED program may even raise more revenues for government than is expended by them on SRED credits.

Don’t misunderstand: auditors do reject claims or offer partial credits, and this can happen when they don’t understand what you are claiming or when your claim fails to fall within the parameters of what is allowable. This is one reason is useful to have a professional assist you in preparing and presenting your claim.

To minimize the foregoing problem, compile SRED information throughout the year in advance of the claim. Record technological uncertainties as they are discovered. Document efforts to reduce these uncertainties as they occur. Several times a year perform a critical review of this compilation of information to see what is missing or could be improved.

Related Information

Formadrain Inc. v. The Queen

The case of Formadrain Inc. v. The Queen, 2017 CCI 42, recently determined that a new approach to making tubing used in repairing drains involved SR&ED. The Crown argued that the project’s technological uncertainty was “entirely in the chemical composition of the...

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