How RTA’s Use the Claim Review Manual to Resolve Issues

April 3, 2015 SRED

What guides the SR&ED claim dispute resolution process at the CRA?

What is claim resolution from a Canada Revenue Agency (CRA) reviewer’s perspective? How do Research and Technology Advisors (RTAs) at the CRA use the Claim Review Manual for Research and Technology Advisors, and what does this mean for claimants during a review?

Scenario: A Review from the Perspective of an RTA

After reviewing a taxpayer’s Scientific Research and Experimental Development (SR&ED) claim, an RTA at the CRA decides that the work claimed does not meet the SR&ED program’s eligibility requirements.

What are the RTA’s next steps to resolve the issue at hand? What should the taxpayer expect the RTA’s next steps to be?

What is the Claim Review Manual for RTAs?

In the event of an issue between an RTA and a taxpayer regarding a SR&ED claim, RTA’s turn to the Claim Review Manual (CRM) for Research and Technology Advisors: ¹

The CRM provides a comprehensive set of procedures for the Canada Revenue Agency’s (CRA) Research and Technology Advisors (RTAs) to perform the technical review of Scientific Research and Experimental Development (SR&ED) claims. The CRM serves as a complete guide for the RTA in planning, coordinating (with Financial Reviewers), conducting and documenting the review of claims. These procedures will help enhance consistency and quality in the review of claims among RTAs nationally [emphasis added].

[…] In addition, the CRM provides part of the basis for a quality assurance program that will ensure the proper application of the SR&ED legislation, policies and procedures, thereby contributing to maintain the fiscal integrity of the SR&ED program [emphasis added].

Examples of SR&ED Dispute Resolution Procedures

Below, we’ve highlighted excerpts from key portions of the CRM:

5.6.10 Dispute Resolution ²

“[…] resolving potential conflicts and disputes involves much more than following a procedure. It requires communication of the RTA’s desire for achieving a common understanding, respect for the claimant’s concerns and the patience to listen to concerns and reduce frustration. It also requires a similar commitment from the claimant to listen and try to understand the RTA.” [emphasis added]
“Another technique of open and effective communication is to ensure that potential issues are identified and explained to the claimant at the outset of the review or as soon as they are discovered.”
“For example, it is recommended that the RTA advise claimants to focus on describing the work that was done, why it was done, rather than arguing how the final material, device, product or process represents a scientific or technological advancement. By focusing on the work that was done and providing substantiating documentation, the discussion is centred on facts rather than opinions.” [emphasis added]

5.12.2 Evidence of Non-SR&ED Work ³

Working with Claimants: Helping Them Understand the Importance of Documentation

Often disputes arise due to the difficulty of establishing that work is SR&ED because of a lack of supporting evidence. That is, in the absence of supporting evidence the RTA is unable to distinguish between SR&ED and non-SR&ED such as routine engineering or data collection. To deal with this effectively, it is important that the claimant understand that this is a review issue with their claim, and that the scientific process of hypothesis formulation, experimentation or testing, and the reaching of conclusions would be expected to produce documentation. The claimant also needs to know the general books and records requirement of the ITA (see 5.13.1.1) and the consequences of inadequate documentation.

A number of different approaches may help the claimant provide support or improve their systems for future claims:

Explain to the claimant your concerns and indicate that supporting evidence is needed to distinguish SR&ED from other non-SR&ED work.

Discuss the process by which the claimant does their work, in order to identify what evidence is produced during the normal work process. Possibly the claimant produces but does not retain evidence, or does not realize that this can be evidence.

Ask the claimant to consider what kind of records or notes they have that may help to demonstrate that a systematic search or investigation took place. Make use of the documentation tool in Appendix 2 of the Guide to Form T661 to assist the claimant to identify some, or provide some examples based on the RTA’s industry experience.

Nonetheless, it is important to avoid creating the impression that providing supporting evidence will automatically mean that their work is SR&ED. If work is not SR&ED, no supporting evidence can change this fact. It is also important to remind the claimant that they are responsible for ensuring that relevant and sufficient supporting evidence is maintained to support their claim. [emphasis added]

Final Thoughts on SR&ED Dispute Resolution

The CRM is an excellent tool for resolving disputes and avoiding potential conflicts before they arise. As evidenced by the types of procedures in the CRM (dispute resolution, steps for clear communication, etc.) it is clear that the Claim Review Manual places a great deal of importance on fostering mutually respectful and professional interactions between RTAs and taxpayers.

What the CRM discourages is an RTA lecturing, arguing with, or refusing to dialogue with a taxpayer [emphasis added]:

“these procedures emphasize working with, informing and educating claimants,” ⁴
“respect for the claimant’s concerns and the patience to listen to concerns and reduce frustration” ⁵
“allow them to express themselves without arguing with them or raising your voice“ ⁶

Before any interaction with an RTA, familiarize yourself with the Claim Review Manual and know exactly what type of behaviour to expect for SR&ED dispute resolution.

This article is based on CRA policy documents available at the date of publication. Please consult the CRA website for the most recent versions of these documents.