Imagine submitting a document – a thesis paper, a corporate plan of action, a report or even a book draft. Your document may be accepted as is when submitted with out any revisions. However, this is not always the case for SR&ED claim.
Sometimes, in fact, many times, the document is reviewed and then finds its way back to you. Questions are posed, additional points are requested, corrections are suggested. Sometimes face to face meetings are arranged for final changes before there is an acceptance of said document. In this case, there is no need to be concerned. The reviewing party is not an enemy but here to see your side of things and suggest ways towards a better, more acceptable path.
Whatever the case may be, someone took an interest, put in effort to carefully go over your thoughts and saw merit in them.
SR&ED submissions work in a similar way. Many claimants, often first timers, have various misconceptions about reviews and requests for clarification about their submissions. Some have the notion that any question is an immediate or impending rejection of their claims. This is far from the truth.
The results of a SR&ED submission typically follow 4 different scenarios:
Scenario One: Your SR&ED Claim is Immediately Accepted
Once your submitted SR&ED claim and tax return reaches the tax centre, it is scrutinized for its ‘completeness’ – a simple first stage check to see if your claim can be processed as is. This means that all the details captured by you here meet the definitions of eligible SR&ED work and costs. If the claim is not flagged for any further reviews, consider it filed! Your tax credit is on its way.
Scenario Two: A Secondary Screening
If your SR&ED claim was marked for a review at the previous stage, it goes through a second round of screening. It is important to remember that this is not a rejection of your claim. It simply means that the person looking at your submission was unsure about some points – technical and/or financial – and therefore, needs further clarification.
Scenario Three: A Desk Review
If at the previous stage, the claims were still marked for ‘further clarification’, the claim is picked up by a coordinating team consisting of a Technical Reviewer (TR) and a Financial Reviewer (FR). The two will work together to evaluate if the claimed work meets the definition of SR&ED and if the costs claimed are permitted SR&ED expenditures, respectively.
Scenario Four: The Site Review
If the desk review left doubts unclarified, arrangements are made for a site review. The idea here is to have the expert CRA reviewer visit the site of work and talk to the people involved in the SR&ED claim directly. During these discussions, supporting documents that justify the claims will be referenced. Once the reviewer(s) is/are thoroughly satisfied, they’ll send a Notice of Assessment over to you.
Understanding the journey of SR&ED claim
It is important for claimants to understand that this process of asking questions and seeking clarifications is a natural part of SR&ED submissions. For some claimants, it seems like an audit. However, from the first flagging of a doubt to the final consultative process of a site review, the reviewer’s intention is to simply clear doubts in order to understand it better.
If you hired a consultant to help you with your claims, you would’ve given them some time to understand and familiarize themselves with your work and processes. The CRA assessors are doing the same. The best way to look at it is as a dialogue – a simple, hassle-free way of making sure that you receive the tax incentives you are entitled to.
Next: What is a SR&ED Review