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? Kelid.ca 

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


Comments

2 responses to “Surviving CRA SR&ED Reviews and Audits”

  1. Either way, I’ve seen the best results come from clients who assigned someone to support the audit as a “project”. Considering that your auditor may be reviewing 20 different cases at any one time, it’s in your best interest to make the process easy for them – essentially helping them help you.

  2. In this exclusive interview former Chief Justice Bowman discusses his land mark decisions on the law that shaped SR&ED and how CRA doesn’t always apply guidelines correctly

    https://youtu.be/hLg-78ui7e4

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