CRA research and tech advisors do on-site reviews of SR&ED claims

THIS week the Canada Revenue Agency announced via Twitter that it was hiring research and tech advisors in Ontario's hot hi-tech hubs, in the GTA, Kitchener, London, Mississauga, Ottawa, and Windsor. While this is not a new practice, it's a reminder to practitioners that the CRA employs tech-savvy advisors to conduct on-site reviews of claims filed with the Scientific Research and Experimental Development (SR&ED) program.

Indeed, the advisor positions require a Master’s or Ph.D. degree from a recognized university with specialization in a field of science or engineering relevant to the SR&ED program. Particular fields of interest are life sciences, computer science, computer engineering, electrical engineering, software engineering, and mechanical engineering.

In an email, Paul Murphy, CRA manager of communications, Ontario region, confirmed that on-site visits are "a recurring action to ensure the CRA has the experts needed to continue to conduct its on-site review of claimed activities. SR&ED claims can be subject to a detailed technical and financial review by the CRA to ensure that they meet the requirements of the Income Tax Act. The CRA’s research and technology advisors and financial reviewers also ensure that claimants receive the SR&ED investment tax credit that they are entitled to receive."

SR&ED Eligibility Requirements

Mr. Murphy also provided an overview of the eligibility requirement to Canadian Accountant:

To qualify for the SR&ED tax credit, the R&D work and expenditures claimed by a business must satisfy the eligibility requirements set out in the Income Tax Act. The research and technology advisor evaluates the claimed work to determine whether it meets the definition of SR&ED. The financial reviewer looks at the costs associated with the claimed work to ensure they are allowable SR&ED expenditures. Therefore, to ensure compliance, the CRA risk-assesses each SR&ED claim to determine if it can be processed as filed or if it needs a more detailed review.   

If required, a detailed review includes a desk review of the information on file, and in some cases, an on-site review at the businesses’ premises.  A detailed review is comprised of: (1) a technical review, which is conducted by the CRA’s Research and Technology Advisors, that determines whether the R&D work claimed is eligible; and (2) a financial review, which is conducted by the CRA’s Financial Reviewers, that determines whether the expenditures claimed are allowable. 

During a site visit, a claimant will be asked to answer questions related to and describe:

• their business operations;
• the SR&ED work done; and
• how the SR&ED claim was prepared (such as how the claimant distinguishes between SR&ED and non-SR&ED activities, and what documents served to help prepare the claim).

In addition to dealing with issues, an on-site visit provides an opportunity to clarify SR&ED Program policies and address any questions or concerns the claimant may have.

Additional information about the technical and financial reviews can be found in the Claim Review Manual for Research and Technology Advisors and Financial Claim Review Manual – Review Procedures for Financial Reviewers available on the CRA’s website.