The 2018 CATA Alliance Survey for SR&ED


The CATA tax and finance advocacy is seeking the guidance of the community in defining areas of concern.

Access the 2018 SR&ED Survey here:

The Survey involves yes/no answers, several checkboxes and then a concluding commentary section. It can be completed in five minutes or less.

Your guidance and feedback is valuable as the CATA advances issues to decision makers in Ottawa.

Federal Budget Falls Short for Canada’s Technology Sector

The federal government’s 2018 budget takes some admirable steps toward securing Canada from cyber criminals, but is otherwise a fiscally irresponsible, red-tape happy document that will stifle, rather than encourage, growth in the country’s tech sector. – Canadian Advanced Technology Alliance

CATA CEO John Reid says that the Liberal government has failed to create support for the innovation superclusters they have talked about, and they don’t address the changing circumstances in Canada’s relationship with the U.S.

He has an issue with the 2018 federal budget, which features some big budget items:

  • Cybersecurity
  • Modernization of federal government’s infrastructure
  • Digital Research Infrastructure Strategy

This is is that the budget is ignoring Canada’s tax laws that are not keeping up with legislation in the U.S. As well, the SR&ED program has been reduced by more than $5 billion over the last 9 years.


R&D Tax Credit Revisited: Muller Report

SR&ED building photo

Recommendations in Muller’s 2009 report make sense to this day.

The following is an excerpt from the final “Full Report” by Paul Daniel Muller, a consultant to the Minister of National Revenue Jean-Pierre Blackburn, dated 30 November 2009, of his review of the R&D Tax Credit Program and the CRA’s action plan, “CRA Action Plan on Consultant’s Recommendations for the SR&ED program”. It was obtained through an Access to Information request to the Department of Finance by the CATA Alliance. Portions of the report are reproduced here as a service to the SR&ED stakeholder community.

2 Timeliness
2.1 Critiques

Timeliness remains a major concern to claimants. Among those respondents to the 2005 Claimant Survey that were dissatisfied with the program, duration of process was the most frequent source of dissatisfaction.2 Duration of process is the second most frequent reason claimants had for writing to the MNR in 2009. It is the only criteria for which CRA has publicly committed to service standards.

Most claimants want to shorten processing time; but at the same time one also want the RTAs

to spend more time counseling them on their claim.

2.2 Accomplishments/Current Initiatives

SR&ED Directorate has taken several steps to improve timeliness. In particular;

  • In 2006-2007, CRA reorganized its claim treatment process by devolving a greater portion of the process to the tax services offices.
  • Pursuant to Budget 2008 which allocated an extra 10M$ to CRA for SR&ED, CRA hired 68 additional science advisors to increase capacity and allow RTAs to spend more time with claimants.

2.3 Findings

2.31 What are the expectations?

Not all claimants have the same expectations with respect to timeliness. Different incentives are at play. In the case of refundable claims, claimants want their claims assessed and their ITCs refunded ASAP in order to help with their cash flow. They are thus are incentivized to file sooner and collaborate with CRA to fullest extent. In the case of non-refundable claims, ITCs are used to offset taxes otherwise payable. With respect to cash-flow, the claimant does not have to wait for CRA to assess its claim; it benefits from the claimed ITC as of the time of filing, assuming it has taxes payable. It can only risk losing some of that credit if its claim is audited. Therefore, for non­refundable claims, the incentives are mixed: on the one hand, the claimant wants to close the issue ASAP so as to be certain of its tax liability and close its financial statements; but on the other hand, the claimant has an incentive to file later and delay closure if it perceives the risk of disallowance as large.


Filing statistics reflect this factor. Refundable claims are generally filed sooner than non­refundable claims, a difference that might be attributable to cash flow concerns. The spread between refundable and non-refundable filing patterns suggests that claimants are not all equally concerned about timeliness. Those claimants with the most legitimate concerns about timely service would be those expecting refunds and those submitting claims within six months.

Overall, over the past five years, less than half of claims (excluding adjustments) were filed within 6 months of the claimant’s fiscal year-end. Also, between 20 and 25 per cent of claims were filed at least 15 months after the end of the claimant’s fiscal year.3

2.3.2 What are the numbers saying?

CRA service standards distinguish between refundable and non-refundable claims. The service standard is 120 days for first time refundable claims and 240 days for adjustments to those claims. For non-refundable claims, the service standard is 365 days, both for first time claims and subsequent adjustments. CRA’s stated objective is to meet those service standards in 90% of cases. Results for 2008-2009, the last complete fiscal year, show CRA is meeting its service standards for 95 to 97 per cent of claims, depending on type of claim.

Table 1 – Success Rate in Meeting Service Standard, by Type of Claim, 2008-2009

Type of claim Service
Refundable claims 120 Days 96%
Non-Refundable claims 365 Days 97%
Refundable claimant-adjusted claims 240 Days 97%
Non-Refundable claimant-adjusted claims 365 Days 95%

Data on timeliness of service for previous fiscal years. going back to 2003-2004, shows improvement. Overall success rate in meeting the service standards for all four types of claims was in the range of 93-94 percent until 2005-2006. From 2006-2007 onwards, overall success rate has remained in the range of 96-97 percent. This improvement, beginning in 2006-2007, is contemporaneous with the reorganization known as “process realignment”, which was implemented in 2006-2007.

This improvement in the success rate has occurred even as the total intake of claims grew by 51% over the same period: from 17,900 in 2003-2004 to 27,000 in 2008-2009.

A breakdown by Coordinating Tax Services Office of the overall success rate in meeting service standards shows general consistency across the country, albeit with some exceptions. Thus the Halifax CTSO has shown the lowest success rate in meeting service standards at 93-94%, for the past three full fiscal years: from 2006-2007 to 2008-2009. Prior to that, from 2003-2004 to 2005-06, it was the Toronto CTS0 that lagged.

2.3.3 Do service standards tell the whole story?

Service standards apply to the time for which CRA considers itself accountable. CRA does not take responsibility for the time elapsed between initial filing of a claim and the date the claim is deemed complete. Beyond that point, after a claim is deemed complete, CRA will temporarily stop the clock when delays occur due to reaons outside its control. Common reasons why CRA stops the clock include:

  • When a claimant takes over 30 days to respond to a request to extra information (during an audit, after the claim has been deemed complete);
  • When a claimant asks CRA to assess adjustments to a series of several tax-years, it can focus on the earliest and ask CRA to put the others on bold pending a decision on the initial one.

A directive explains all reasons than CRA can invoke to temporarily stop the clock. However, the same directive also states: “from a claimant’s perspective, the only factor of importance is the total elapsed time to process a claim”.4 This is not to imply CRA should take responsibility for the entire duration, but merely to remind ourselves that total elapsed time is the only metric that matters from the claimant’s perspective.

Table 2 compares the average number of days, per type of claim and type of review, for which CRA holds itself accountable (Accountable Days), as opposed to the average total number of days (Total Days). For those claims that are audited, the ratio shows that Accountable Days represent between 38 and 55 percent of Total Days, depending on type of claim. This ratio may explain why claimants, especially those that are audited, continue to complain about the duration of the process despite the fact that CRA is meeting its service standards.

Table 2 also shows the interplay between the goal of meeting the service standard and the goal of ensuring fiscal integrity. In other words, the easy way to reduce average total days is to reduce the proportion of claims that are reviewed. Conversely, greater emphasis on ensuring fiscal integrity, which is at the core of CRA ‘s mission, will come at the price of lengthier processing times.

Table 2 – Average accountable days vs. total days, 2008-2009

# claims Avg
Accntbl /
I. Refundable Claims (120 day service standard) Downscreened and Denied 6646 11 15 75%
Limited Review 3995 52 61 84%
Detailed Desk Review 1239 86 150 57%
Detailed On-site Review 1892 97 243 40%
All Review Types 3786 42 7224 58%75%
2. Claimant-requested adjustments to refundable claims(240 day service standard) Downscreened and Denied 396 18
Limited Review 3492 71 76 94%
Detailed Desk Review . 678 140 193 73%
Detailed On-site Review 1238 173 316 55%
All Review Types 5805 97 137 71%
3. Non-refundable claims (365 day service standard) Downscreened and Denied 1920 19 31 60%
Limited Review 762 124 157 79%
Detailed Desk Review 418 201 422 48%
Detailed On-site Review 732 234 -621 38%
. All Review Types 3844 102          .. 213 48%
4. Claimant requested adjustments to non- refundable claims(365 day service standard) Downscreened and Denied . 883 21 29 73%
Limited Review 954 116 132 88%
Detailed Desk Review 328 205 303 68%
Detailed On-site Review – 652 271 594 46%
.All Review Types                     2327                  157 270 58%

* Lines do not total because claims with coding errors were excluded.

Nonetheless, even when total days are considered, claim processing times have improved over the past five years, especially since 2006-07. Figure shows maximum number of total days for 9 out of 10 deciles of processed claims. from 2004 to 20095. For example, 90% of claims were processed within 380 days (total, time) in 2004-2005, down to 328 days in 2008-2009. This depiction of processing duration, in Total Days, is consistent with CRA’s ‘service standards which are measured in Accountable Days.                  .

The tenth docile contains the problem files, including the worst cases. Worst case values range from 2492 in 2005-06 to 4793 in 2007-08

Processing times vary by Industry – Among those industries with over 100 claims since April 2007 and where a detailed (desk or on-site) review was performed, the six industries with the highest mean-processing time are:

  • Transportation Equipment Manufacturing
  • Chemical Manufacturing
  • Administrative and Support Services
  • Telecommunications Carriers
  • Paper Manufacturing, and
  • Management of Companies and Enterprises.

The four industries related to agri-food do not stand out with respect to processing time.

Incomplete claims are trending down – Total time is impacted, among other factors, by the time a claimant takes to file the information that was lacking at the time of first filing. Overall, the percentage of claims that did not contain all prescribed information at time of first filing dropped from 21% in 2004-05 to 12% in 2008-2009. The inclusion of a completeness check list in the new T66I form (Part 7) might help push the proportion of incomplete claims even further down. The percentage of incomplete claims over total claims is greater for non-refundable claims than for refundable claims, which might result from the greater impact the program has on companies eligible to refundable ITCs. 


CRA, SR&ED Directive 2003-03

Claimants have been obligated to file claims within 18 months of the end of their fiscal year since 1994. MNR used to have discretion to accept claims filed after the 18-month deadline but that discretion was removed in 2006. Nowadays, approximately I% of claims are rejected because of this I8-month rule.

4 CRA, SR&ED Directive 2003-03

A decile is a group composed of one tenth (10%) of all individuals in a population. Here, the population of processed claims is sorted by duration of process and then divided into ten groups. The figure shown for each docile is the duration of the longest (worst) claim in that decile.

To see the full report of the R&D Tax Credit as a PDF, visit the CATA Alliance page here.

This report was completed in November 2009.  When it was released to the then Minister of Revenue Jean-Pierre Blackburn his assistant assured us that the Minister found the report significant, that actions were merited, and that he would release it to promote discussion.  Many of you met with Mr. Muller and provided input to this report.  We find it to be a very interesting, third party review, highlighting many issues that we are still discussing.

Subsequent Ministers chose not release the report.  Why?  Its release could have encouraged a more productive dialogue. ” – CATA Alliance 

Rethinking the Research and Development Tax Credit

SR&ED Nose on Clown

It’s not surprising that recommendations in Muller’s 2009 report are relevant today.

The following is an excerpt from the final “Full Report” by Paul Daniel Muller, a consultant to the Minister of National Revenue Jean-Pierre Blackburn, dated 30 November 2009, of his review of the SR&ED Research and Development Tax Credit Program and the CRA’s action plan, “CRA Action Plan on Consultant’s Recommendations for the SR&ED program”. It was obtained through an Access to Information request to the Department of Finance by the CATA Alliance. Portions of the report are reproduced here as a service to the SR&ED stakeholder community.

1 – Introduction
1.1 Scope
In-scope – All aspects of program delivery, with a specific focus on timeliness, consistency, cost of compliance, tools and services. Industry-wise, focus on the agri-food sector. Focus on SMEs.

Out of scope – Anything for which Finance is responsible; namely fiscal policy issues such as refundability of all claims, and project or expenditure eligibility issues that are rooted in the Income Tax Act.

1.2 Approach
Each issue is treated is two parts. In a first part, I summarize the main complaints addressed to the program, as well as what CRA has done, is doing, or intends to do in response to them. I then go on to analyse the issue and report on my findings.

In the second part of each issue, I take a double-barrelled approach, focusing both on managing claimant expectations and improving CRA performance. In some cases, I suggest some messages that CRA or the MNR or both might put to the constituency, either in response to some of the most oft heard critiques or to elicit cooperation in the pursuit of our common goal of encouraging R&D through a cost-effective program.

In other cases I suggest options for actions CRA could take to respond in deed to those critiques. As in many walks of life, SR&ED stakeholders can be satisfied or dissatisfied with a program depending not only on actual performance, but also on their expectations. Managing expectations AND improving program delivery are BOTH necessary to close the gap between the two and raise overall stakeholder satisfaction.

1.3 Inputs
Inputs for this report were obtained from seven types of sources:

  • From stakeholder submissions to the Finance-CRA Joint Consultations in 2007;
  • From correspondence received by the MNR1
  • From meetings and meeting and telephone conversations with external stakeholders, including claimants, lobby groups tax preparers and Department of Finance ministerial staff;
  • From CRA official documents and SR&ED internal policies, action plans and reports;
  • From the CRA SR&ED database;
  • From internal CRA sources, through meetings and conversations with SR&ED officials;
  • From third party (AG, OECD, etc.) reports on SR&ED or on R&D support at large.

 I Correspondence received by the MNR includes letters, facsimiles and emails. Correspondence can be received either directly from the taxpayer or his tax professional, or via a Member of Parliament. Volume of correspondence pertaining to SR&ED appears stable at around 20-25 per year up till 2007, with a spike of 32 in 2004. In 2008, volume reached a record 36, and in 2009, we are at 22 at the half-year mark. The bump in 2008 and 2009 appears to be due to cash-strapped companies asking for quicker refunds of ITCs. Most frequent topics in ministerial correspondence are: l) disagreement with disallowance of claims; and 2) timeliness.

1.4 Postulates

  • CRA is to remain administrator of SR&ED. Moving the program’s administration to another department such as Industry Canada is not an option.
  • TSOs and CTS0s are to remain responsible for the regular processing of claims, consistent with CRA’s functional model. Recentralization of treatment is not an option.
  • MNR and CRA have committed to maintaining historical practice with respect to the
    interpretation of controversial concepts, such as experimental production.

To see the full report as a PDF, visit the CATA Alliance page here.

This report was completed in November 2009.  When it was released to the then Minister of Revenue Jean-Pierre Blackburn his assistant assured us that the Minister found the report significant, that actions were merited, and that he would release it to promote discussion.  Many of you met with Mr. Muller and provided input to this report.  We find it to be a very interesting, third party review, highlighting many issues that we are still discussing.

Subsequent Ministers chose not release the report.  Why?  Its release could have encouraged a more productive dialogue. ” – CATA Alliance 



Photo Credit: Ryan McGuire

Is Paul Daniel Muller’s SR&ED Report Still Relevant?

SR&ED Report Still Has Relevance, Russ Roberts Says

Russ Roberts, Sr. VP of Advocacy, CATAAlliance has published a video about SR&ED Dispute Resolution Advocacy. He cites the Final SR&ED Report by Paul Daniel Muller, consultant to the the Minister of National Revenue, Jean-Pierre Blackburn, dated 30 November 2009, about his review of the SR&ED Program and the CRA’s action plan, “CRA Action Plan on Consultant’s Recommendations for the SR&ED program”, dated 2013-01-22.

As Russ says in the video, SR&ED is an incentive program, and it needs to be managed that way.

The report was obtained through an Access to Information request to the Department of Finance. It recommends the CRA redesign its dispute resolution process so that claimants can have access to a Second Technical Review (STR), and that the STR is performed by an independent qualified reviewer.

Mr. Muller and the courts recognize that there is a bias in the CRA that must be addressed for disputes to be fairly and effectively addressed. How do we get CRA to see the light?

CATA believes that the CRA’s de facto re-orientation of Canada’s largest program of support for innovation needs to be corrected immediately so that the full spectrum of technological based advancements is supported and that SR&ED can be effectively claimed when it is conducted in conjunction with the highly integrated commercially-oriented development efforts that Canadian companies need to apply in order to be competitive and efficient, and respond to world markets.” – Russ Roberts, Sr. VP, Advocacy, CATAAlliance on SR&ED Dispute Resolution Advocacy

The report was written in 2009. The Minister of Revenue at the time found the report was significant and worthy of sharing for an open discussion with SR&ED stakeholders and the community. Subsequent ministers have chosen not release the report….and the CATA is asking why.

Surviving CRA SR&ED Reviews and Audits

what it takes

It takes a certain amount of grit to be ready for a CRA audit or review.

Alice Jackson from Kelid has a great piece on preparing for a CRA SR&ED Review. It talks about the CRA SR&ED review letter that initiates the process, and what documents will be required or reviewed by auditors.

If there is a site visit, the CRA may want to talk to employees, probe project time frames, and discuss key technological obstacles or experimental processes.

Key Points to Remember Prior to on site CRA SR&ED Review:
• Do not just focus on the final outcomes of the work claimed
• Divide the work into a chronological order
• Determine the technological or scientific uncertainties or obstacles faced, along with the hypotheses formulated to resolve them
• Describe the analysis and experimentation performed together with the conclusions obtained.
• Prepare your explanation on how the work mentioned in the technical narratives has been documented.
• Provide supporting evidences such as time logs, notes, trial logs, time sheets, drawings, emails, invoices, and test results to substantiate and support what you described. Furthermore, make sure to have such supporting evidences to be readily available.” – How to Prepare For Your CRA SR&ED Review? 

Ryan Pernia at Espresso Capital has a ”10 Step Survival Guide“ article for SR&ED Audits. He says that defending claims takes up more of his time because SR&ED tax claims that are being questioned by auditors are more common (suggesting auditors at CRA are more aggressive in finding discrepancies). The post expands on the following suggestions of how to survive an audit:

  • Respond ASAP
  • Understand the Scope
  • Assign a Project Manager
  • Present Your Case Logically and Concisely
  • Quantity and Quality
  • Prepare
  • Find Your Star Witnesses
  • Know thy Customer
  • Question Assumptions
  • Learn

See more on Espresso Capital’s blog here.

The CRA does have a review manual, and you can get that here: Claim Review Manual



Photo Credit: Ryan McGuire

CATA Alliance Updates on Changes to SR&ED Legislation

Important SR&ED Update- Russ Roberts, Sr. VP Advocacy, CATAAlliance

Russ Roberts talks about a lot of changes, driven by the Harper government, coming into effect in the new year. New reporting requirements around the SR&ED legislation will be effective December 31st.

As far as SR and ED goes, there is a new emphasis on due diligence:

  • This is reflected in what is required in the T661 – it now requires you put in who the claim preparer is.
  • The expectation is that you can demonstrate what goes into a claim actually does exist (and there are penalties if you don’t have that evidence) so make certain there is support for what you file, and the accuracy of that documentation.
  • Information about the nature of the fee relationship between you and your claim preparer will have to be provided.

Many tax preparers feel the CRA inspectors will not understand the contingency relationships that companies have with their SR&ED preparers (which are usually beneficial to the client), and that this will taint the process. As well, this information is considered confidential and will be publicly available to competitor firms.

Russ says the CRA is sensitive to the complexity of the issues involved, but that does not mean there will be pain for those who are subject to some of these new initiatives.

CATAAlliance is an active participant in the formation and delivery of government framework tax policies, regulations and activities that are critical to the success of Canada’s high-tech industries. Your corporate guidance and participation are needed and appreciated as we can leverage the industry voice to be both clear and accurate for maximum effect. – CATA website

To view more CATA videos about SR&ED tax credit issues, click here.

SR&ED Seminar with Excellence in Manufacturing Consortium


The EMC wants you to know more about government funding programs.

Northbridge Consultants and the Excellence in Manufacturing Consortium (EMC) are hosting a seminar to help companies in the agri-food sector get a better understanding of the Scientific Research and Experimental Development (SR&ED) tax credits program as well as other government funding opportunities Tuesday, June 16, 2015, from 1:00 p.m. to 2:30 p.m.

EMC offers Consortium Members a broad range of services and programs to help them become more competitive. Their investment is returned in lower costs, better opportunities to compete for business and lower stress in dealing with the day-to-day complexities of running a manufacturing operation.

NorthBridge Consultants has been assisting companies access government funding for over 20 years, and is one of the largest independent government funding consulting firms in Canada.

Additionally, the seminar will deliver information pertaining to provincial and federal government initiatives that target expansion, innovation, exporting, hiring, and training.  Instruction will be provided on how to allocate and separate costs between programs, and case studies will be reviewed to illustrate examples of various funding opportunities. – Northbridge Blog

To see the original post click here.

The EMC has a great information page on the SR&ED program and how it relates to manufacturers and its members, you can see that here.

Photo Credit: Ryan McGuire

What Your Cash Hungry Startup Needs to Get SR&ED


There is a lot of misinformation about the SR&ED Tax program, get the facts first.

There seems to be a lot of misinformation floating around about the SR&ED program, according to Jeffrey Johnson, the Technology, Media and Telecommunications (TMT) leader for the National Capital Region (NCR) for Deloitte. Some people think the program is “dying”, and others have heard of cutbacks, but the reality is up to 64% of labour costs can be claimed, if the project qualifies under the Act. Also, FYI, getting a claim approved is not “luck”!

Well-written SR&ED descriptions, which clearly make the case for eligibility, greatly increase your chances of success. To write such a description you must obviously understand what is and isn’t eligible. As a founder you are naturally proud of your product and its ability to meet a need for your clients. But being innovative in meeting a business need isn’t necessarily SR&ED. It is critical that you base your claim on technical uncertainty, not on business risk or innovation. Note that claims in the fields of social sciences are specifically disallowed by the legislation.” – Jeffrey Johnson, Deloitte

Here are the CRA’s eligibility criteria:

Scientific research and experimental development means systematic investigation or search that is carried out in a field of science or technology by means of experiment or analysis and that is

(a) basic research, namely, work undertaken for the advancement of scientific knowledge without a specific practical application in view,

(b) applied research, namely, work undertaken for the advancement of scientific knowledge with a specific practical application in view, or

(c) experimental development, namely, work undertaken for the purpose of achieving technological advancement for the purpose of creating new, or improving existing, materials, devices, products or processes, including incremental improvements thereto,

and, in applying this definition in respect of a taxpayer, includes

(d) work undertaken by or on behalf of the taxpayer with respect to engineering, design, operations research, mathematical analysis, computer programming, data collection, testing or psychological research, where the work is commensurate with the needs, and directly in support, of work described in paragraph (a), (b), or (c) that is undertaken in Canada by or on behalf of the taxpayer.” – CRA Website

More from the CRA website here.

See Jeffrey Johnson’s complete article: “Decoding SR&ED – What Your Cash Hungry Startup Needs to do to Become Eligible” here.


Photo courtesy of Ryan McGuire

Does Your Prototype Qualify for SR&ED?

SRED Prototype

Prototypes and their construction are considered to be part of the research process.

Prototypes fall within the parameters of SR&ED claims because they are used to demonstrate material results that reflect the basic research and experimental development aspects of a valid project. Even if the prototype is sold, this event is considered secondary to its original purpose. From the CRA website:

A prototype is not developed for the purpose of sale or its subsequent use in the business. Normally, the sale of a prototype is only incidental or secondary to the carrying out of the SR&ED work. Usually, the prototype is dismantled, destroyed, scrapped, or otherwise recognized to have nominal residual value (less than 10% of the construction costs of the prototype). It is important to note that even if the asset is sold or converted to use in business operations, it is the purpose for which the asset was constructed that will determine whether it will be treated as a prototype or as a custom product or commercial asset. The development (design, construction, and testing) of a prototype falls within the scope of basic researchapplied research, or experimental development.”

As well, it’s possible that several prototypes can be considered valid for a claim. That’s because progressive prototypes can be used to improve and test a process or experiment.

In certain situations, several different versions of a prototype may be developed, each one involving SR&ED in an attempt to improve on the previous version. In other words, each new version of the prototype utilizes the knowledge gained from the previous version. In such cases, for each version of the prototype, the expenditures associated with the identified SR&ED work will be treated as SR&ED current expenditures.”

More on prototypes and SR&ED here.