The Canada Revenue Agency (CRA) Seeks SR&ED Consultants
Attention: Policies May Have Been Updated *** Some of the policies referenced were updated 2021-08-13. We are working to update this article and others. *** |
The Canada Revenue Agency (CRA) search for external SR&ED consultants to assist with SR&ED claims.
In early 2018 the CRA posted a notice on buyandsell.gc.ca that the agency is “seeking to establish a supply arrangement to maintain a list of pre-qualified consultants … on an ‘as and when requested’ basis, authorized through individual contracts, to provide [SR&ED] technical expertise and advice.” 1 Buyandsell.gc.ca is a government service tendering site, and the notice is valid until 2 p.m. EST on January 9, 2023.
What Kind of SR&ED Consultants?
The CRA is looking for consultants who can assist, specifically, “a) on the eligibility of work claimed under the SR&ED program; or, b) on cases where a Notice of Objection (NOO), a formal objection of a notice of assessment, has been received.” 2 The request “establishes the framework for entering into a contract, and includes a minimum set of terms and conditions which would apply to any resulting contract.” 3
What is the Mandatory Criteria to Apply?
Consultants who wish to be considered for the supply arrangement must demonstrate that they have met the minimum required hours within the past 10 years of “professional hands-on experience for the scientific/technical field for which they are being proposed.” 4 If the proposed consultant has one scientific or technical field of experience, they must have worked a minimum of 3,600 hours in that field during the past 10 years. If they have more than one area of expertise, they require a minimum of 3,600 hours of experience per field, with a minimum total of 7,200 hours. If the hours listed in any single field is less than 3,600 hours, then those hours will not be considered for the purposes of determining total experience. The consultant must also meet all technical criteria within the scientific/technical field(s) for which they are applying.5
The notice states that work will be performed at various CRA locations across Canada and at the consultant’s work site; however, consultants may also identify regions of Canada to work in when their application is submitted. The notice also establishes how contractors are selected in the “contractor selection methodology,” which includes information on how contractors are selected “for requirements valued less than $25,000,” and for those “valued more than $25,000 (GST/HST included) but less than the current NAFTA threshold.” 6
Why Does the CRA Seek SR&ED Consultants?
In June 2017, a Globe and Mail article noted that “the CRA has been more stringent with the program in recent years, which has led to a drop in the volume of claims and the number of filers.” 7 We’ve analyzed reports on the volume of claims and staffing at the CRA previously, and found that the funded allocated to the SR&ED program has been decreasing steadily over the years. So why does the CRA need to hire additional support?
According to Karl Lavoie, a CRA media spokesperson, the recent tender notice is simply part of the agency’s standard operating procedure. “This is not a new practice and the SR&ED Program has sought additional expertise to help determine the eligibility of certain claims for many years,” said Lavoie in an e-mail. “Every five years, the list of potential outside consultants is renewed. The process follows federal contracting rules and is posted on the buyandsell.gc.ca site.” 8
“The CRA employs a highly skilled workforce of scientists and engineers and uses consultants on an as-needed basis,” continued Lavoie.
The program maintains a list of consultants in a number of different fields such as Natural Science, Applied Science and Engineering who provide expert assistance on files that have already been selected for review. While the SR&ED program has highly-qualified staff, the very technical nature of some of the workload requires a second opinion when determining the eligibility of work in a specific field of science or technology within a SR&ED claim.9
As to the drop in the number of claims and filers, Lavoie pointed out that while it is true that “both the amount of credits claimed and allowed have declined over the years,” as a result of the Federal Budget 2012 changes that have made the SR&ED program “less generous,” he noted that “the percentage of credits allowed has remained relatively consistent.” 10
Lavoie provided the following statistics to back his assertion, noting that the taxation year 2014 is the most recent year for which complete data is available.11 This is because legislation provides corporations with up to 18 months after their year-end to file their SRED claim, and so the CRA does not have final numbers as of mid-February 2018 for more recent taxation years.
|
Tax Year |
Number of SR&ED claims (thousands) | SR&ED ITC Claimed (billions) | SR&ED ITC Allowed (billions) | % ITC allowed |
| 2014 | 20 | $3.3 | $2.8 | 84.5% |
| 2013 | 22 | $4.1 | $3.3 | 81.7% |
| 2012 | 23 | $4.2 | $3.7 | 87.8% |
A Caveat: The Taxpayers or The CRA
If you’re interested in applying, be aware that there are conflict of interest provisions that prohibit SR&ED consultants from working for both the CRA and a taxpayer at the exact same time. According to the CRA’s Application Policy, “A consultant providing advice to taxpayers with regard to the SR&ED Program or preparing SR&ED claims would normally be considered to be in a conflict of interest situation.”12
The Policy continues:
Because of the commercially sensitive nature of the information provided by taxpayers in their SR&ED claims, no person having any past or existing conflict of interest should have access to this information. Typical situations in which a conflict of interest may arise are those where a person:
- Deals at non arm’s length with the taxpayer (for example, a social relationship with the owner of the company).
- Has any existing or potential pecuniary interest in the taxpayer’s affairs.
- Has any past, existing or potential interest regarding the utilization of the taxpayer’s research or intellectual property.
- Is in the same business (i.e. in direct competition) as the taxpayer.
- Could use, in his own business, the information he would obtain from the taxpayer.
- Has previously worked as an employee or a consultant for the taxpayer.13
Consultants must declare any real or perceived conflicts of interest, past, present or future, before reviewing a claim. The Policy does note that “it is important to distinguish between consultants who provide tax advice and consultants who work in their field of expertise. In fact, it should be noted that the use of highly qualified experts who do provide technologically based advice to others helps to demonstrate their expertise and neutrality in situations of litigation. Such work would normally not constitute a conflict of interest.” 14 Still, when in doubt, the Senior Science Advisor at CRA Headquarters should be consulted.15
Summary
In the end, it is perhaps not newsworthy that the CRA is seeking outside consultants to help on SR&ED claims, as the agency has relied on the help of consultants in the past.16 This is noteworthy for SR&ED consultants seeking extra work with the CRA on an as-needed, and as-required basis, as the federal government is maintaining their need for SR&ED consultants to provide second opinions on aspects of the SR&ED program.
This suggests that the SR&ED program will continue to exist as it has, at least in terms of how the CRA processes claims, and the type of help that the agency needs. It remains to be seen, however, if consultants will see an increase in work as the CRA becomes more stringent with SR&ED program requirements.