The majority of SR&ED claims submitted are accepted without being subjected to a detailed review. In these cases, the claim is considered “accepted as filed”. When this occurs, the CRA will send out a letter stating that the claim was accepted, but no determination was made about the eligibility of the work; however, they’ve accepted the claim.

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Typically, once an SR&ED claim has been accepted as filed, it is not subject to reviews retroactively. This means that if you file a claim in the next fiscal year, which may be a continuation of prior work and is rejected, it will not automatically trigger a review of your prior claim. With that said, the CRA has outlined several instances where a SR&ED claim that was previously accepted as filed may be sent back for re-assessment (i.e. reviewed and possibly reduced or rejected).

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These instances include are:

• Expenditures claimed in a given fiscal year and are not paid within 180 days of the end of that fiscal year
• Restatement of a prior year’s income of the company or an associated company’s income
• Identification of non-arm’s length transactions affecting qualified SR&ED expenditures
• Fraud or misrepresentation

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The items listed above are direct examples taken from CRA SR&ED claim acceptance letters. The first three items in the list all relate to financial variables that can affect the SR&ED return rates and/or have specific financial treatments. The last, fraud or misrepresentation is a criminal offence and may lead to charges over and above the rejection of a prior SR&ED claim.

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While the risk of a claim being reassessed after being accepted is extremely small, it is essential to maintain your supporting documentation on both the financial and technical sides. As the SR&ED legislation is a part of the Income Tax Act, claimants are required to keep these records for six years from the end of the fiscal year to which they relate.

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