An SR&ED consultant can also assist in highlighting words that are frequently confused for one another. One example is “technical vs. technological”
The Canada Revenue Agency supports approximately 20,000 businesses every year in the form of SR&ED, which delivers over $3 billion annually in aggregate to these companies. More telling, 75% of these supported companies are small businesses. 1 Support For Your R&D In Canada: Overview of the Scientific Research and Experimental Development (SR&ED) Program. (p. 3)] In a small company, this situation means that the resources for communicating with the CRA fall upon a small group of people that may already be working extra hours to support the business.
The Ingenuity Group recommends the use of an SR&ED consultant to assist with undertaking your claim, as our company includes consultants who are used to writing in the language that the government expects. With that understanding, however, it is still useful for a company preparing to make a SR&ED claim – whether with the assistance of a SR&ED consultant, or without one – to prepare claims in as clear language as possible.
1. Use the CRA’s Resources to Understand the Requirements
A first step to this process is to use the CRA’s resources to understand the requirements. The agency has an extensive website that includes numerous fact sheets. Additionally, the CRA lists five tools that claimants have access to: a first-time claimant service, public information seminars, pre-claim project review services, account executive services that provide a designated contact within government, and a web-based eligibility tool. 2
2. Understand What the CRA Want in Line 242
One of the most vital sections in the CRA claim is Line 242, where applicants have 350 words to elucidate how they intend to advance technology. The agency recommends a clear description of the technological objective, the manner of the work performed, and why the capability the company is working on is an improvement of what came before. The response is intended to be solutions-based, describing what work “led to the creation of new or improved materials, devices, products, or processes.” 3
3. Translate the CRA
With regard to Line 242, we previously recommended avoiding the use of five terms in SR&ED claims: “trial and error”, “product”, “fine-tuned”, “application” and “migration” as these can create misunderstood perceptions on the part of the CRA reviewer. Further, all terms must be quantified; for example, if a difficulty is mentioned, it is important to note why the situation why was difficult and how it was resolved.
An SR&ED consultant can also assist in highlighting words that are frequently confused for one another. One example is “technical” vs. “technological.” The Canadian Oxford Dictionary partially defines “technical” as “using technical language; requiring special knowledge to be understood” and “of or relating to technological equipment.” The word “technology”, however, partially means “the application of this to practical tasks in industry.” 4
In all communications, it is best to ensure that what is said to the CRA aligns with the perceptions of the referee reviewing the claimant’s application for SR&ED, under reasonable circumstances. As such, it is best to rely on written communications, to understand the decisions made by the Tax Court of Canada, and to make frequent reference to CRA documents while preparing the claim.
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- Canada Revenue Agency. [n.d. ↩
- Canada Revenue Agency. (2013). T4088 – Scientific Research and Experimental Development (SR&ED) Expenditures Claim – Guide to Form T661. Retrieved from https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/t4088-scientific-research-experimental-development-expenditures-claim-guide-form-t661.html. ↩
- Canada Revenue Agency. (2013). T4088 – Scientific Research and Experimental Development (SR&ED) Expenditures Claim – Guide to Form T661. Retrieved from http://www.cra-arc.gc.ca/E/pub/tg/t4088/t4088-12e.html. ↩
- Unknown Author. (1998). The Canadian Oxford Dictionary. Don Mills, Ont.: Oxford University Press Canada. ↩