Effectively writing SR&ED claim application is made easier by having good evidence for your project. Be it written records, photographs, videos or statements of work, you likely already know how useful it is to have clear and extensive records of the work performed.
In Line 270 to 282 in the T661 Scientific Research and Experimental Development Tax Credit Application form, you can let the CRA reviewer know what a good applicant you are by checking off appropriate boxes to show what types of records and evidence you have. You should not submit the evidence with your T661 but rather keep it on hand.
Why do I have to keep supporting evidence for SR&ED?
The CRA asks for this evidence “to substantiate that the scientific research and experimental development (SR&ED) work was performed and allowable expenditures have been incurred.” 1 If you are caught in a review, it is expected that you’ll be able to provide the supporting evidence of your claimed work you stated that you have in these lines. Should the CRA find that you have claimed work for which you have no supporting evidence, this work “will likely be disallowed”.2 Keeping evidence helps you avoid having to endure some intensely stressful situations. It also equips you with the opportunity to demonstrate your eligibility and help you answer the CRA’s questions in case of a review.
What type of SR&ED evidence does the CRA want?
The CRA is looking for any “contemporaneous documentation that is dated, signed, and specific to the work performed”. 3 Any work that was generated during the experimentation or research is considered contemporaneous. For more information on how to best collect contemporaneous information, look no further than here.
In Appendix 2 of the T4088, the CRA has put together a table to help you keep track of any useful evidence.
The table acts as a useful tool for you to organize your evidence based on type. This sorting into clear categories is incredibly useful should your project be marked for review.
Keep this table on hand as a guide for each project you perform. The table should help you collect evidence that will do the following:
- It will help you differentiate commercial work from SR&ED work if your claimed project took place in an environment where both occur. It will show the segregation of project and commercial costs.4
- It will sort out the work of subcontractors or partners in the overall project. The evidence will keep track of “what services or products were provided, who performed the work, where the work took place, as well as who acquired rights to any intellectual property resulting from that work”.5 Think of how useful these records will be when filling out Lines 267 to 269!
- It will record the materials used, “the quantities consumed or transformed in SR&ED work, and how materials and products were ultimately disposed of“.6 The value of this is important when explaining costs incurred.
So how can you, the SR&ED applicant, properly use the table to keep clean and clear records that would make any CRA agent smile approvingly? Furthermore – how can you use this table to help you fill out Lines 270-282?
Let’s look at the table itself:
The first column lists some “examples of supporting evidence” that one may collect during their project. The next five columns hold topics which pertain to questions you’ve been asked in Part 2 of the T661. The topics are outlined in blue; and the corresponding T661 line numbers are outlined in yellow.
To use the table, simply identify “supporting evidence you possess that best addresses the question in that column”. For example, if you have videologs of your experiment or work described in Line 244, you’d enter “a tick mark in the box” in the row for “Photographs and videos” under the column of “Work done: experimentation, analysis, support work, progress”.7
Supporting evidence that you possess that doesn’t fit any of the types listed can be entered in the “Others” column.
You’ll notice that certain boxes are shaded out: this is because that specific row’s type of supporting evidence does not necessarily apply “to the related lines in the corresponding column”.8
After filling the table out, it will help you fill out Lines 270 to 282. For example, you will now be able to go back and check off Line 278 which asks if you have any photographic or video evidence to “support your claim”.9
Just like the evidence you reference in Lines 270 to 282, you do not submit the table. The table only acts as an organizer to help you keep track of your evidence and fill out your T661 application: furthermore if your application is marked for review, the organization provided by the table “may help both you and the CRA reviewer identify the supporting evidence.” 10
Other considerations for Lines 270-282
Help! I don’t have that much evidence!
Not to fear: the CRA does not expect that “all of the supporting evidence listed in the table would be generated for every SR&ED project”.11 A “lack of detailed documentary information should not discourage you from making an SR&ED claim” especially if you are a first-time claimant. Here you can consult the CRA to determine if there are “other types of supporting evidence” which can prop up SR&ED work and expenditures. 12
What is my word limit if I have other types of supporting evidence in Line 281?
If a type of supporting evidence you possess is not listed from Lines 270 to 280, then tick off the box at Line 281 and in “15 words or less” describe your evidence in the space provided at Line 282. 13
What if I forget to tick a box?
If you fail to tick a box when initially submitting your claim, you will have an opportunity to provide evidence to the CRA during a review “even if the reporting deadline has passed”.14
Meticulous evidence is a crucial part of a strong SR&ED claim. Not only may it help you avoid CRA reviews, but it can help you avoid fines or loss of credibility or rebates if you do happen to be marked for review. Make sure that you keep clear records of as many aspects of your SR&ED as possible.
And remember – while you may have beautiful records which show your foresight and organization – you do not submit the documents you reference in Lines 270 to 282.