Talking SR&ED: Why Evidence is Key to a Robust SR&ED Claim

Date: July 23, 2023

When it comes to SR&ED claim acceptance, the CRA has the final say. As the organization that administers the program, the CRA makes the final decision on whether a SR&ED claim is accepted or denied.

One surefire way of improving the chances of your claim being accepted is maintaining evidence that will support your claim when the time comes for submission and review. What follows are some tips for maintaining evidence that will support a strong SR&ED claim.

Why does the CRA expect evidence?

It is understandable that the CRA will expect a level of evidence of R&D activity.

1. Firstly, R&D doesn’t happen by accident

An eligible project needs to attempt to extend overall knowledge and/or capability in a field of science or technology and needs to face technological uncertainty in doing so. The CRA’s question on this is: how do you know you have extended overall knowledge and capability in the wider industry? Usually, the answer is: there was an initial benchmarking exercise. This could have been attempting to procure a ready-made solution, consultation with peers and the supply chain, or research into similar technologies for adaptation to this requirement.

Unfortunately for many claimants under review right now, that benchmarking exercise isn’t always formal and isn’t always recorded, meaning the proof that the claimant is improving upon the benchmark isn’t overtly demonstrable.

2. Secondly, the CRA lists activities which directly contribute to R&D

They are; the creation of something needed to resolve scientific or technological uncertainties, planning, design, testing and analysis. It stands to reason that at least one of these if not all, demands some level of correspondence, design documentation, or record keeping.

CRA is regularly requesting “contemporaneous project documents that informed and support the SR&ED claim” – i.e. records of the creation, planning, design, testing and analysis!

3. Finally, when compiling a SR&ED claim, the claimant establishes the cost of executing the qualifying R&D activity

The CRA expects to check the basis for the cost figures in the claim to ensure they properly represent the extent of eligible work.

What can businesses do?

If you don’t already, start keeping records. Not to say every single detail must be meticulously logged, but there are some suggestions of easy practices that can be implemented and will be useful in building the claim and presenting it to the CRA if needed.

1. Take meeting minutes

So often R&D projects are discussed in meetings, yet this isn’t recorded. You don’t need to quantify the exact amount of time each person spoke for, but record things like what stage the project is at, what are the current project focuses on, what are the current challenges, what testing has taken place, and what were the outcomes, what hasn’t worked recently and why, what might be the next steps. These discussions clearly capture the R&D process in action.

2. Log email correspondence

Again, it’s so common that emails are traded internally and externally about an R&D project, the feasibility of potential technologies, challenges with certain iterations, or newly discovered technological barriers. Make sure to log these emails somewhere easy to access. They are an excellent reference for the project timeline and can serve as evidence of how substantial certain challenges have been.

3. Keep activity logs

Chemical formulations; production protocols; coding iterations – all of these things can harbour technological uncertainty. But so many claimants either don’t record the information OR don’t keep records of failures once they have solved the problem. Evidence of failure is what indicates technological uncertainty. Keep these records!

4. Make project summary notes and keep project governance documents

In the absence of formal activity logs, which might not be applicable to some projects or businesses, fortnightly or monthly summary notes can be excellent to demonstrate the timeline of the activity. As can project governance documents such as scope documents or project timelines. Try recording such detail as things attempted in the recent fortnight, technological challenges faced, tests undertaken and causes of failure, who has been involved, and what planning took place for the next stage. This might take only 10-20 minutes each fortnight/month if done on time and concisely, and can make all the difference when needed!

Many eligible projects are falling short of the CRA’s desire for evidence. Not all businesses have the capacity or need for detailed project logs throughout projects – in reactionary start-up models with few stakeholders such activity often falls by the wayside. Listed above are realistic, implementable, and most importantly, valuable record-keeping tips that will make all the difference during your SR&ED claim process.

If you have any further questions about how to record your activity, get in touch with us for a free discussion on this topic, the wider claim process, and how we can help. Call us at 604 629 8863, or contact us here.


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