CRA SR&ED
September 15, 2009
As of November 10, 2008, the Canada Revenue Agency (CRA) issued a revised Form T661 and is in effect for all years, but its use is mandatory for fiscal years ending after December 31, 2008.
According to the CRA, the purpose of the revision is to simplify the process for filing a Scientific Research & Experimental (SR&ED) claim and is specifically targeted to small businesses. Key changes include all previous schedules now incorporated into the T661 form itself, including the technical description. The requirement of the technical description also underwent changes and is now under a word-limit for each section. A listing of all specific changes can be found on the CRA website. These changes are in an effort to reduce the administrative burden on businesses, facilitate the CRA’s review and expedite the claim review process.
Although the above changes do make the claim preparation process more streamlined, there is a general concern as to whether the restrictions on the technical description length may hinder the claimant’s ability to demonstrate the eligibility of the project. But by properly managing the space provided in each section, the claimant now has an opportunity to convey more precisely the issues and problems they faced during the course of the project and explain the steps taken to overcome them. This, in turn, should provide the CRA with enough information and understanding of the project to assess the eligibility with less ambiguity and reduce the possibility of an on-site review.
However, it is important to note that despite how well the project description is written, documentation remains the key aspect to the success of any given claim. The CRA has stressed that documenting the project as it progresses (“contemporaneous records”) is the only way to prove that the issues and activities stated in the technical description did in fact occur within the fiscal period in question. This is particularly true for claimants who have made claims in the past and are now expected to follow the rules of the program more closely.
While a lack of documentation should not deter future claimants from
submitting a claim, implementing a new or modifying an existing tracking
system (e.g. Job Cost Reports) as quickly as possible will ensure that
all activities and related expenses can be substantiated with the proper
documentation and help mitigate any reduction in credits in the event
of a review. The claimant can then establish a clean submission history
which will further reduce on-site reviews of future claims and may even
speed the assessment process, resulting in quicker approvals.
