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It has been noted by practitioners, claimants and associations that the practices of CRA have become significantly more restrictive. There have been sufficient complaints on this that the program is under significant review in the government. There have been sufficient representations to the ombudsman’s that that office has undertaken a review to the end of making recommendations to the Minister. However until such recommendations are made and changes implemented, one must adjust to the current environment of review. Changes of this magnitude take years to change and have to be in place for 5 years before they remain permanent. Two significant structural changes have taken place from CRA:
- The new T661 that was implemented in 2009 and modified for 2010 and beyond.
- The new and very comprehensive Claim Review Manual which is a consolidated operations manual on the process that RTAs should follow in conducting reviews and communicating the results.
Although innocuous enough by themselves, the CRA reviewer training practices given has brought about administrative and behavioural changes in how CRA is reviewing and assessing changes.
Behavioural changes noted include the following:
- emphasis on compliance rather than an incentive
- emphasis on directly engaged and directly supporting
- emphasis on looking at the lower levels rather than at the highest level appropriate
- emphasis on standard practice as a phrase for denial
- software is only eligible associates seated with hardware (this is attributed to the regional science and technology specialist)
- emphasis on research as opposed to technology (this is shown in the format for the current T661)
- ignoring both principles related to technological uncertainty as expressed in Line 242 of the T661
- Interpretation of publicly available information to a global perspective—in the past it has been relative to the company doing the SR&ED)
- emphasis on delineating between commercial and research
- emphasis on advances being algorithms
- difficult to show the project within the context of the company
- if audited there may be a quota (performance standard) for adjustment
How does this affect companies?
- It certainly raises the risk and uncertainty of claims
- The project must sound very technical and not business
- Focus on what was done in the financial year
- Show the experiments and iterations in a year—test plan, test results, decisions resulting from results etc.
- Emphasis on separation of the project work and the end product
- Each word in a claim becomes more important
- Necessary to absolutely avoid trigger words
Still not clear about how CRA review practice changes will affect your SR&ED claim? Contact a professional.
This article is presented only for informational purposes and does not constitute legal advice. You should retain legal counsel if you require legal advice regarding your individual situation.