The technical narrative section of an SR&ED claim is the most important part. This shows the entire scope of your development and experimentation process. Technical narratives may take some time, however, crafting them well will make it easier for you to refine to the most important details, experimental analysis, uncertainties, and knowledge gained. When editing, ensure you stay away from the words that appear as red flags to the Canada Revenue Agency (CRA’s) Research and Technology Advisors (RTAs) and don’t mention product names.
Tips for writing SR&ED Technical Narratives
1. Make the communication logical and concise.
The progression of ideas should flow smoothly between sections, allowing the reader to go through the document quickly without searching for any information. Try a few different ways to see which way reads better. Chronological or grouped based on key themes (such as areas of uncertainty) are two of the most common. Depending on the project one way may read better than the other. Some find that writing based on themes makes it easier to list new knowledge generated in Line 246.
2. Make sure you read all of the instructions.
The T4088 is a step by step guide for filling out the T661, using it will help to ensure that no mistakes are made when filling out your claim.
Additionally, the policies are available for all to read. It is important to make sure that your work and technical narrative aligns with the current policies as well as with the Income Tax Act (ITA) itself.
3. Continuity between SR&ED projects.
For continuing projects, list in the same sequence as the year previously claimed. This allows the RTA to easily cross-reference materials. Again, the goal is to have them read as quickly as possible, thus reducing the time spent on your file and the likelihood that reviewers will have further questions.
For discontinued projects, make it clear why projects from previous years with continuing timelines were not continued or claimed in the current SR&ED claim.
Double-check that you are not duplicating wording each year. The CRA does not want to see the same technical narrative, the work should progress throughout the years.
4. Keep it simple.
Not all projects need to be broken down individually. It is possible to combine projects, provided they deal with similar technology (but in different application areas). Technological projects in companies are often multi-denominational and are used in different business projects; this is fully understood by the Canada Revenue Agency.
5. Keep timelines concise.
CRA mandates aim to cut off funding for anything they think might run over multiple years (“perpetual projects”). Be wary of R&D projects that are more than three years in duration. Companies should re-examine ongoing projects to see if there are new technological thrusts. If not, end the previous project, and appropriately name the next project if you identify new technological obstacles/uncertainties.
6. Use your word count wisely.
There are word limits in the technical narrative sections of the T661 form – they should be used wisely. Avoid describing support activities. The project descriptions are like lenses that are focused on different aspects of a project. It is not necessary to give all the support activities. Instead, focus on the key milestones and difficult activities/obstacles so you can include quantifiable measurements statistics, conclusions, and other evidence.
Remember to put appropriate time and effort into preparing these documents. Often, those who are involved personally in the SR&ED project are too close and some of these steps are missed or neglected. Having someone unfamiliar with the project to read through the technical narrative is always advised, as it will expose any gaps in clarification or information.