Contents
A quick overview
- After submitting your SR&ED claim, the CRA begins initial processing, confirming receipt and validating all required forms and documentation.
- The claim then undergoes a more detailed desk review, where CRA specialists evaluate the technical and financial aspects to ensure SR&ED eligibility.
- In some cases, the CRA may conduct a deeper audit or site visit, reviewing the technical or financial details of the claim.
- If additional information is required during this review, timely and thorough responses can help avoid delays or potential rejections.
- The CRA will issue a Notice of Assessment or Reassessment with the outcome, which could result in an accepted, adjusted, or denied claim, with the option to appeal if necessary.
Introduction
Submitting a Scientific Research and Experimental Development (SR&ED) claim is a crucial step for businesses seeking valuable SR&ED tax credits, but what happens next? Whether you submit your claim online or through the mail, understanding the process that follows can help ensure your claim is processed smoothly and successfully.
After submitting your claim to the Canada Revenue Agency (CRA), the process of review begins, which could include both technical and financial evaluations. This article will guide you through the steps that occur after submission, from SR&ED eligibility checks to potential audits and assessments, helping you avoid delays and ensure your SR&ED tax credit is granted in a timely manner.
Phase 1: Submission and Initial Processing
When you submit your SR&ED claim, the CRA begins the process by acknowledging the receipt of your submission through the platform you used to file.
- Acknowledgment of Receipt: If you submitted your SR&ED claim electronically via EFILE, NETFILE, or CRA’s My Business Account, the platform will provide you with a confirmation of the successful submission. For paper filings, no immediate confirmation is provided, but you can check the status through My Business Account or by contacting the CRA directly.
- Basic Validation: The CRA will perform an initial check to ensure that all necessary forms and documentation have been provided, and that the submission follows the CRA’s SR&ED guidelines.
Initial Review: This involves a quick assessment to confirm the overall SR&ED eligibility of your projects. If all requirements are met, your claim moves forward; if not, the CRA will contact you for clarification or missing documents.
Phase 2: CRA Desk Review
Once your claim passes through the initial processing, the CRA conducts a more thorough desk review. This involves CRA specialists analyzing both the technical and financial components of your submission. Here’s what to expect:
Technical Evaluation: During this phase, CRA staff evaluate the SR&ED eligibility of your R&D activities. This includes reviewing your project descriptions and determining whether the activities align with SR&ED guidelines on technological uncertainty and experimental development. The CRA will check if your work qualifies as SR&ED-eligible R&D.
For more info on SR&ED eligibility and technological uncertainty, check out our article SR&ED Technological Uncertainty: Does Your Work Qualify?.
Financial Review: The CRA will also review your financial claims, such as wages, materials, and overhead costs, ensuring they relate directly to your R&D work. They will verify that your SR&ED tax credits are accurately calculated, according to the credit calculation methods established by the CRA.
Processing Time: The CRA aims to process straightforward claims within 60 to 120 days. If issues arise, or if additional information is needed, the process can take longer.
Phase 3: Potential CRA Review, Audit, or Site Visit
In some cases, the CRA may decide to conduct a more in-depth audit of your SR&ED claim. There are two primary types of reviews: technical reviews and financial reviews. As part of either of these reviews, the CRA may also choose to conduct an on-site visit to better understand the scope of your SR&ED activities.
Technical Review
A technical review focuses on the scientific or technological aspects of your claim. The CRA will evaluate whether the R&D work you claimed involves a technological uncertainty, a key component for SR&ED eligibility. The CRA may request additional documentation, including detailed project descriptions, experimental results, or expert reports to substantiate your claim.
Financial Review
The financial review examines the costs associated with your claim. You may need to provide payroll records, invoices, and receipts for materials and subcontractor expenses to show that they were directly related to your SR&ED activities. The CRA will verify that only eligible costs are included in your claim.
On-Site Review
An on-site review is an option the CRA may use for both technical and financial reviews. This visit allows CRA officials to assess your SR&ED work firsthand. During the site visit, the CRA may interview personnel, observe your R&D processes, and inspect records or prototypes. On-site reviews help the CRA gain a clearer picture of your SR&ED activities and ensure they align with the eligibility criteria.
Phase 4: Responding to CRA Requests for Information
If your SR&ED claim is selected for a review or audit, the CRA will typically ask for additional documentation. Provide detailed records of your R&D activities, including project timelines, payroll details, and experimental data, to support your claim. Without sufficient documentation, your claim could be rejected or scaled back. It’s essential to respond promptly and provide comprehensive information to avoid delays.
For quick turn-arounds ensure both:
A Timely Response
Responding quickly to CRA information requests can help prevent lengthy processing times.
Comprehensive Documentation
Sufficient documentation that provides detailed records of your R&D activities.
Phase 5: The CRA Decision
Once the CRA completes its review, they will issue a Notice of Assessment or Notice of Reassessment. This outlines whether your claim has been accepted, adjusted, or denied.
Outcome #1 - Accepted Claim
If your claim is approved, you’ll receive the corresponding SR&ED tax credits based on the eligible activities and expenses outlined in your claim. These credits can be applied to reduce your taxes payable or refunded directly to your business.
Outcome #2 - Adjusted Claim
If some portions of your claim are found ineligible, the CRA will provide a detailed explanation of the adjustments. This may result in reduced tax credits.
Outcome #3 - Denied Claim
If the entire claim is denied, the CRA will explain why it was deemed ineligible. In this case, you may choose to file an appeal.
Phase 6: Appeals and Dispute Resolution
If you disagree with the CRA’s decision, you can file a Notice of Objection to dispute their findings. This process involves providing further documentation or clarification to support your claim. If the dispute remains unresolved, you may escalate it to the Tax Court of Canada for a more formal resolution.
Understanding SR&ED Tax Credit Calculation
The SR&ED tax credit calculation is based on your eligible expenses, which include wages, materials, overhead, and subcontractor costs. The amount you can claim depends on your province and the type of business (e.g., Canadian-controlled private corporation or public company). For example, SR&ED tax credits in Canada typically range from 15% to 35% of eligible expenses.
It’s essential to keep track of eligible expenses throughout your project’s lifecycle, as inaccuracies or misattributions could lead to reduced credits during the CRA’s review.
Best Practices for Organizing SR&ED Claims
To ensure your SR&ED claim is processed smoothly, here are some key best practices to follow:
Keep Accurate Records Year-Round: SR&ED claims require detailed documentation of your R&D work. Keeping comprehensive records throughout the year will ensure you have all the necessary information when it’s time to file.
For more practical tips and expert advice to help you effectively document your R&D activities year-round, check out our downloadable guide Fuel Innovation with Efficiency: A Guide to Building Processes That Work.
Consult SR&ED Experts: Working with an SR&ED consultant or accountant can help ensure your claim is compliant with CRA guidelines and that all eligible activities and expenses are captured. Expert guidance can also help you navigate the audit process if necessary.
Review the CRA SR&ED Guide Regularly: The CRA updates its guidelines regularly, so it’s important to stay up to date on any changes in SR&ED eligibility or claim submission requirements. Consulting the CRA’s SR&ED Guidelines & Policies will ensure your claim aligns with current standards.
Conclusion: Preparing for What Happens After You Submit Your SR&ED Claim
Submitting your SR&ED claim is a significant step, but it’s equally important to understand the next phases. Your claim will go through various stages of review, including processing, possible desk reviews, and audits, which will ultimately determine whether it’s approved, adjusted, or denied. Ensuring you have thorough documentation and addressing CRA requests promptly can make the entire process more efficient.
To maximize your SR&ED tax credits and avoid potential setbacks, be organized in maintaining detailed records throughout your R&D activities. This proactive approach will help ensure your claim is well-supported and less likely to face delays or rejections.
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Navigating the post-submission phase of your SR&ED claim can be complex. Keeping clear documentation is key to a smooth process. If you need help organizing records or understanding next steps, our SR&ED experts are here to support you—reach out anytime.
8,500
Number of Projects
500M
Total Claim Expenditures
96.5%
Successful Claims
