The onus is on the reviewer to hear the client out and provide productive feedback on the claim.
There is no denying that the CRA is cracking down on SR&ED claimants. This year alone they have hired around 100 new technical reviewers to extend the audit process to include more claims and companies. They have also tightened eligibility criteria multiple times in past years. Approximately 30% of claims submitted will undergo a review, according to the CRA. This number can vary depending on the size of the claim, the quality of documentation, the extent of subcontractor expenditures, or if you have submitted a claim in the past which was denied.
BeneFACT has a dedicated reviews team to ensure claims get approved, and they are intimately familiar with the process. Success largely depends on the CRA Research and Technology Advisor (RTA) who gets assigned to your case. It is the job of the claimant (and their consultant) to help the RTA make a determination regarding SR&ED. Here are some things that separate the good reviewers from the great ones.
An RTA assigned to your file is expected to read your technical reports and claim, and then file a Request for Information (RFI) or book a meeting with the taxpayer. The review meeting is an opportunity for the taxpayer, consultant, and reviewer to all meet and discuss the projects. The onus is on the reviewer to hear the client out and provide productive feedback on the claim. You should be provided every opportunity to address their concerns and argue your point of view. A good reviewer will not ask leading questions and will make efforts to understand your perspective.
When the reviewer provides their proposal letter with their determination of your claim, you should feel that your voice was heard and that the reviewer provided a reasonable explanation for their decisions.
The majority of RTAs at the CRA are engineers who have worked in the field related to the claims they are assigned too. This experience is crucial to understanding the technical reports for a SR&ED claim, and deciding what is non-routine work. In cases where the RTA is an engineer but not in the field your company operates in, you may need to show how certain types of work may be considered routine in one industry, but non-routine in another.
RTAs and claimants almost always have divergent opinions on whether their SR&ED qualifies, but a good RTA reviewer will negotiate with you. They may take a hard stance on a certain project, but then give some leeway for others that are under scrutiny. The role of the claimant is not to antagonize the RTA, but rather work with them to come to common understanding.
BeneFACT is Canada’s largest independent SR&ED consulting firm. Call us at 1-855-TAX-BACK (829-2225) to start collecting all the R&D tax credits you are entitled to today.