Filing for the Right Province

Sometimes a company will have project work done in another province than the one in which it is situated. If that is your company, make sure that any SRED claim is filed for the province in which the work was done. For example, a Calgary company that claims SRED work that was done for them by a Kelowna contractor, must file a BC claim form for that work. The Alberta form doesn’t cut it.

Filing the wrong form is not a serious problem if the error is noticed and corrected before the filing deadline, but often a claim is filed close to the 18 month deadline and by the time someone tells the applicant that the provincial credit is not being paid out because the work was not done in the province for which the claim was made, it is past the deadline --- too late to make an effective provincial claim.

SR&ED Claim Reviews

What is the likelihood of changing a CRA reviewer’s mind after they have made a proposal about your claim?  I have seen such a change occur….more than once…..but such a result is a minority outcome.

This is unfortunate because I am increasingly finding that to CRA, SRED is whatever the RTA reviewing the claim says it is. Reviewers have a knack for sending lengthy documented refusals that are very short on technological information and reflect no relevant hands-on experience with the technology that is the context of the claim. Too often I am seeing reviews done by people that display no evidence of technical proficiency in the activities for which the reviewed claim has been made.  At once time I thought that such experiences were isolated, but I have become jaded, and I am forming the impression that perhaps there is an agency wide strategy within CRA to reduce claims and wear out claimants, albeit politely.

This is not to imply that your review will be done by incompetents. There are some very bright reviewers, and some really helpful ones, but the fact that appeals to SRED related assessments are now several times what they were a few years ago should say something about what is happening.  The data at this link is informative: https://www.scitax.com/pdf/Bulletin.55.Statistics.Reveal.Dramatic.Increase.in.SR&ED.Appeals.11-Apr-2014.pdf.

SR&ED Basics: For What Are Reviewers Looking?

The in-person review of your SRED claim involves determining whether you did eligible work, and then if it is decided that you did, a reviewer makes a decision as to what it cost, i.e.: what expenditure amounts are eligible.

The determination of the eligibility of the work done relies upon the 5 questions addressed in a series of posts:

http://gordonfeil.blogspot.ca/2016/11/the-5-sr-questions.html

http://gordon-feil-sred.blogspot.ca/2017/01/uncertainty.html

http://gordon-feil-sred.blogspot.ca/2017/01/the-second-question.html

http://gordon-feil-sred.blogspot.ca/2017/01/question-3.html

http://gordon-feil-sred.blogspot.ca/2017/01/question-3-continued.html

http://gordon-feil-sred.blogspot.ca/2017/02/question-4.html

http://gordon-feil-sred.blogspot.ca/2017/03/the-last-question.html

Quantifying your claim also involves reviewing the costs associated with eligible work: engineering, design, operations research, mathematical analysis, computer programming, data collection, testing, and psychological research.  This doesn’t mean that everything you spend on these are eligible costs. The costs have to have been incurred to do the research or experimental development that comprises the project. If the expense was incurred for a reason other than to aid in resolving the technological uncertainties of the project or to obtain technological advancement, it is not claimable as part of that project.

Certain types of work are specifically excluded: market research or sales promotion, quality control or routine testing, research in the humanities or social sciences (excepting psychological research);  exploring for minerals or petro-chemicals (but developing tools for these activities can be eligible), commercial production, style changes, and routine data collection.