Who do you want assisting with your defense in an SR&ED review?
The Scientific Research and Experimental Development (SR&ED) program provides tax refunds for eligible research and development (R&D) expenditures. What should you do if your application is selected for review?
We have previously discussed reviews (CRA Claim Review Process, Five Tips to Survive a Review, among others) and what can be done if you want to dispute an assessment by the Canada Revenue Agency (CRA) or make a complaint about how the CRA handled your claim. However, is it appropriate to get a lawyer involved in disputes with the CRA? If so, when should you seek a lawyer, and will they be a help or a hindrance?
This article discusses whether seeking the services of a lawyer is the correct approach when the CRA asks to review a claim, or when you wish to dispute the CRA’s decision.
When It All Begins
In many cases, a review is an amicable exchange of information. It is an opportunity to discuss the work performed and demonstrate compliance with current CRA policies. Occasionally, things do not go as planned—tempers flare, disagreements erupt, and SR&ED applications risk being denied. In these cases, you may decide you’ve had enough.
That said, showing up to a meeting accompanied by a lawyer may be seen by the CRA reviewer as a very aggressive move, and they may respond accordingly. Unless there are significant extenuating circumstances, it is generally a good idea to work with the CRA independently to determine if you can address the situation without legal representation. Simply providing the CRA with extra information about why your work is eligible may be enough for your claim to be accepted. During these initial stages, you can educate yourself on the process, engage an SR&ED consultant, or use training material such as our Comprehensive Guide to SR&ED’s information on Audits and Reviews to help you navigate the process.
When to Get a Lawyer Involved
A general guideline is to contact a lawyer after you have decided to submit a Notice of Objection (NoO)1 to the Appeals Division. SR&ED consultants generally have less expertise in this area, and, by this point, you will have started progressing towards the Tax Court of Canada. If you have already submitted a NoO and have decided to appeal your assessment to the Tax Court of Canada, it may be worth enlisting the help of a lawyer.
Lawyers vs. SR&ED Consultants
When seeking external help, a claimant will often turn to one of two groups: lawyers or SR&ED consultants. Both offer certain advantages and disadvantages. Some legal firms specialize in SR&ED and can offer a combination of both groups, though often at a higher rate.
While a lawyer will be useful if you expect to fight the case through the appeals process and have the case evaluated at the Tax Court of Canada, a consultant may be more efficient if it is simply a matter of discussing issues with the reviewer directly.
The information in this article is based on our years of experience with the SR&ED program; however, it does not constitute formal legal advice.
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- Government of Canada. (February 23, 2012.) T400A Objection – Income Tax Act. (Accessed: September 1, 2017.) Retrieved from: https://www.canada.ca/en/revenue-agency/services/forms-publications/forms/t400a-objection-income-tax-act.html. ↩