The number one piece of advice we give to our clients with respect to the Scientific Research and Experimental Development (SR&ED) program is to treat the Canada Revenue Agency (CRA) as a Customer. The reason for this is quite simple: Return on Investment.
At the end of the year, the CRA will provide your company a return on your qualifying R&D investments through the SR&ED program. To get your return, you must undertake eligible activities, provide certain deliverables (i.e. T661) and maintain appropriate records. This is not unlike the activities an organization would undertake when completing work for a ‘regular’ client. As in any other case, your return greatly depends on the customer satisfaction.
One area where this philosophy particularly applies is maintaining quality supporting documentation for your SR&ED activities. In the T4088-08e (Guide to the T661), the CRA states that contemporaneous documentation is the “best supporting evidence that you can provide”. However, this type of documentation may not normally be created by an organization that practices Agile/XP development methodologies, or uses simple time tracking. For SR&ED purposes, the CRA would like to see documentation specific to SR&ED work versus other R&D efforts. To some this might seem onerous, but our advice is to treat the CRA like a customer. Like any other customer, the CRA expect certain deliverables before cutting you a cheque.. MCN can assist your organization with implementing methodologies that through practical means, will help your organization produce the materials required by the CRA. As a part of our SR&ED services, our consultants can show your staff simple things that can be done to produce the necessary documentation as part of your normal course of business.
Treating the CRA as a customer is particularly important if your SR&ED claim gets audited. Just as you wouldn’t shout down one of your clients, the same holds true for CRA SR&ED auditors. The vast majority of CRA reviewers are quite courteous and reasonable people who know their profession rather well. At MCN, our consultants go to great lengths to ensure that we understand, cooperate and maintain productive, professional relations with CRA auditors. We find that such relationships are essential when reviewing SR&ED claims. While both sides can be passionate as to why or why not a particular task is eligible under the program, keeping the discussion at the professional level and supporting your arguments with material evidence is the real key to success. At the end of the day, the SR&ED audits that go well are ones where organizations treat the CRA as a client – with understanding, professionalism and cordiality, regardless of the differences each side may have.
