Claim Review Manual for Research and Technology Advisors

SR&ED Program

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• CRM Table of Contents

Chapter 9.0 Appendices

Table of contents

• Appendix A
  
  • Appendix A.1: Request for information letter: Sample
  • Appendix A.2: Initial claimant contact letter: Sample
  • Appendix A.3: Samples of better books and records letters
    
    • 3.1 Better books and records letter
    • 3.2 Better books and records agreement
  • Appendix A.4: Standard review plan: Sample
  • Appendix A.5: SR&ED review reports
    
    • 5.1 SR&ED review report
    • 5.2 SR&ED Review Report template-explanation of summary table
  • Appendix A.6: Special situations
    
    • 6.1 Files with previous or outstanding notices of objection
    • 6.2 Bankruptcies, company shut down, or facility sold
    • 6.3 Out-of-country equipment, records or personnel
    • 6.4 No existing physical facility
    • 6.5 Remote claimant location
    • 6.6 Separation of head office from R&D site
    • 6.7 Borrowing claimant’s records
    • 6.8 Claimant’s documentation supplied as electronic media
    • 6.9 Claims involving classified information
    • 6.10 Second technical review by a new RTA
    • 6.11 Partnership claims
  • Appendix A.7: Considerations during the on-site visit
  • Appendix A.8: Mutual Expectations: Claimant and RTA
  • Appendix A.9: List of websites
• Appendix B
  
  • Appendix B.1: Revisions
    
    • 1. 1 Explanation of changes

Appendix A

Appendix A.1: Request for information letter: Sample

Date

Appendix A.2: Initial claimant contact letter: Sample

Appendix A.3: Samples of better books and records letters

3.1 Better books and records letter

Date

CTSO Address

Name and title of person
Claimant name and address

Dear Claimant:

Re: SR&ED Claim for the period(s) [insert period here, yyyy-mm-dd to yyyy-mm-dd]

BN/Social Insurance Number (SIN):

During our recent review of your SR&ED claim for the period from [insert date] to [insert date] we determined that your records are not adequate for purposes of the Income Tax Act.

[Insert description of the specific deficiencies and what we require them to do in the future, such as how long to keep the documents.]

Copies of [insert appropriate documents, if required] are enclosed for your reference.

We trust this information and these explanations clearly outline the Canada Revenue Agency’s requirements on this matter and that you understand the importance of keeping documents that support the SR&ED expenditure and tax credit claim. If you do not keep this documentation, future SR&ED expenditures and tax credits may be disallowed.

To show that you will comply with this request, please sign and date the enclosed agreement and return it to our office within 30 days. A copy of Information Circular 78-10R4, Books and Records Retention/Destruction and a return envelope is enclosed for your convenience. If you require further assistance, please call me at the number listed below.

Yours truly,

RTA Name, FR Name or both]
SR&ED Division
Name of TSO
Telephone: [Insert local Phone Number]
Facsimile: [Insert local Fax Number]

Address: [Insert TSO Address]

Internet: www.cra.gc.ca
Enclosures

3.2 Better books and records agreement

Assistant Director Name
Name and Address of Tax Services Office

Attention: [insert reviewer name])

Re:

Name of claimant
BN/SIN:

Address
City/Town, Province Postal Code
Postal Code

In addition to the books and records I currently maintain, I will also keep the following records to comply with the requirements of the Income Tax Act in order to claim SR&ED Tax Credits:

[Insert books and records required]

I understand that I have to keep all the records and supporting documents for the time periods specified in Information Circular 78-10R4, Books and Records Retention/Destruction, and that I have received a copy of this information circular.

Name and title:

Signature:

Date:

Appendix A.4: Standard review plan: Sample

1. Identification Section

ABC Inc.

Taxation Year End (TYE): 05-31-2009

BN: 55555 5555 RC0001

2. Technical and joint technical-financial Iisues

Identify technical and joint technical-financial issues with the associated project(s), including issues previously identified by the Control Function and in the tax centre (TC)’s screening.

Issue 1:

Issue 2:

3. Suggested Scope of the Review

Outline suggested scope of review if not all the projects / issues will be reviewed in detail. Explain the rationale for the scoping.

Project / Issue 1:

Project / Issue 2:

4. Plan and Steps to Resolve the Issues

Outline plans and steps to resolve the above issues, such as a list of questions to ask, information to look at, details concerning an on-site visit, consultation, etc.

Project / Issue 1:

Project / Issue 2:

5. RTM (or Delegate) approval – Signature & Date (if needed)

Appendix A.5: SR&ED review reports

5.1 SR&ED review report

Note: This appendix presents only the information that needs to be included in the SR&ED review report.

Scientific research and experimental development (SR&ED) review report

1. Identification

Claimant: [corporation’s or individual’s name]

Business/SIN number:

Claimant’s TSO: [No & Name] [For example: 99 – Headquarters]

Address:

Contact:

Telephone:

Research & Technology Advisor (RTA):

Telephone:

Financial Reviewer (FR):

Telephone:

Tax Year(s) End: [yyyy/mm/dd]

SR&ED Expenditures: [Line 400 of Form T661]

AIMS Case #:

Case selection reason:

Are there any other reports issued for the same tax year end? [Yes or No]

If yes, date(s) of report(s): [yyyy/mm/dd]

Note:
This report presents the determinations of the Canada Revenue Agency (CRA) concerning whether any claimed work meets the definition of SR&ED in subsection 248(1) of the Income Tax Act, and other decisions on joint technical-financial compliance issues not directly related to the definition of SR&ED in subsection 248(1) of the Act. The decision of whether an expenditure is for SR&ED is determined by the FR based on the determinations of the RTA as well as other requirements of the Act.

2. Summary if results by tax year

Tax Year: [Yr1] [Yr2]

Number of projects in this claim (X = A+B+C+D):

1. Number of projects where all reviewed work received an eligibility determination (A = i+ii+iii).
   
   1. Number of projects where all reviewed work meets the definition of SR&ED ( AW ). Includes projects where the reviewed work is AW and the remainder is accepted as filed (AAF).
   2. Number of projects where some reviewed work meets the definition of SR&ED and some reviewed work does not meet the definition of SR&ED ( SW ). Includes projects where the reviewed work is SW and the remainder is AAF.
   3. Number of projects where no claimed work meets the definition of SR&ED ( NW ).
2. Number of projects where all claimed work cannot be substantiated. It is not possible to determine if the claimed work meets the definition of SR&ED, therefore the conclusion is unsubstantiated ( UN ).
3. Number of projects where all claimed work is accepted as filed without a review to determine if the claimed work meets the definition of SR&ED ( AAF ). The decision to AAF these projects means that the CRA has neither confirmed nor refuted the eligibility of the claimed work.
4. Number of projects where claimed work received a combination of determinations/conclusions/decisions, and are not listed under A, B, or C.

Were any decisions made on other joint technical-financial issues not directly related to the definition of SR&ED in subsection 248(1) of the Act? [Yes or No]

3. Review issues

4. Review methodology

5. Information and supporting evidence reviewed

6. Review observations, determinations, conclusions, and other decisions

7. Working with the claimant

8. Claimant concurrence

9. Recommendations for future claims

10. Other financial review considerations

11. Signatures

Signed by:
Date: [yyyy/mm/dd]
[Print the name of the Research & Technology Advisor]:
Research & Technology Advisor

Approved by:
Date: [yyyy/mm/dd]
[Print the name of the Research & Technology Manager]:
Research & Technology Manager

5.2 SR&ED Review Report template-explanation of summary table

This appendix explains how to categorize the review results in the "Summary of results by tax year" table and explains each row in the SR&ED Review Report (SRR) template.

a. Revised SRR template table

Summary of results by tax year

Tax Year: [Yr1] [Yr2]

Number of projects in this claim (X = A+B+C+D):

1. Number of projects where all reviewed work received an eligibility determination (A = i+ii+iii).
   
   1. Number of projects where all reviewed work meets the definition of SR&ED ( AW ). Includes projects where the reviewed work is AW and the remainder is AAF.
   2. Number of projects where some reviewed work meets the definition of SR&ED and some reviewed work does not meet the definition of SR&ED ( SW ). Includes projects where the reviewed work is SW and the remainder is AAF.
   3. Number of projects where no claimed work meets the definition of SR&ED ( NW ).
2. Number of projects where all claimed work cannot be substantiated. It is not possible to determine if the claimed work meets the definition of SR&ED, therefore the conclusion is unsubstantiated ( UN ).
3. Number of projects where all claimed work is accepted as filed without a review to determine if the claimed work meets the definition of SR&ED ( AAF ). The decision to AAF these projects means that the CRA has neither confirmed nor refuted the eligibility of the claimed work.
4. Number of projects where claimed work received a combination of determinations/conclusions/decisions, and are not listed under A, B, or C

Were any decisions made on other joint technical-financial issues not directly related to the definition of SR&ED in subsection 248(1) of the Act? [Yes or No]

b. Explanation of each row of revised table

Summary of results by tax year:
Explanation:

Tax Year [Yr1] [Yr2]:

• Replace [Yr 1] with the fiscal year of the claim.
• For example replace [Yr 1] with 2008 and [Yr 2] with 2009.

Number of projects in this claim (X = A+B+C+D):

• This number represents the total number of projects claimed.
• This number is the same as the number found on line 050 of the T661.

A. Number of projects where all reviewed work received an eligibility determination (A = i+ii+iii).

• This number represents the total number of projects where work was reviewed and the result was an eligibility determination.
• This number is equal to the sum of the values of i, ii, and iii.

i. Number of projects where all reviewed work meets the definition of SR&ED ( AW ). Includes projects where the reviewed work is AW and the remainder is AAF.

• Enter the number of projects whose review results meet the description in category A-i.

ii. Number of projects where some reviewed work meets the definition of SR&ED and some reviewed work does not meet the definition of SR&ED ( SW ). Includes projects where the reviewed work is SW and the remainder is AAF.

• Enter the number of projects whose review results meet the description in category A-ii.

iii. Number of projects where no claimed work meets the definition of SR&ED ( NW ).

• Enter the number of projects whose review results meet the description in category A-iii.

B. Number of projects where all claimed work cannot be substantiated. It is not possible to determine if the claimed work meets the definition of SR&ED, therefore the conclusion is unsubstantiated ( UN ).

• Enter the number of projects whose review results meet the description in category B.

C. Number of projects where all claimed work is accepted as filed without a review to determine if the claimed work meets the definition of SR&ED ( AAF ). The decision to AAF these projects means that the CRA has neither confirmed nor refuted the eligibility of the claimed work.

• Enter the number of projects whose review results meet the description in category C.

D. Number of projects where claimed work received a combination of determinations/conclusions/decisions, and are not listed under A, B, or C.

• Enter the number of projects whose review results meet the description in category D.

Were any decisions made on other joint technical-financial issues not directly related to the definition of SR&ED in subsection 248(1) of the Act? [Yes or No]

• If decisions were made on other joint technical-financial issues select yes in the column of the respective fiscal year, otherwise select no.

Appendix A.6: Special situations

6.1 Files with previous or outstanding notices of objection

As discussed in Chapter 2, claimants have a right to file an Notice of Objection (NOO) if they disagree with their assessments. This means that RTAs may find themselves with claims where prior year reviews have been subsequently reviewed or are being reviewed by the Appeals Division. Additionally, claimants can take their objections to the Tax Court of Canada.

While the RTA is normally not involved in the review by Appeals unless new information is submitted, it is important to know if there are any prior year claims currently in Appeals and the outcome of any completed appeals.

1. Identifying appeals files with notices of objection

For completed objections with a technical issue, copies of the decisions are sent to the Assistant Director (AD) of the local CTSO from Headquarters (HQ), Stakeholder Relations Division. Copies of these decisions should be placed in the applicable TF98 file by the CTSO. For files currently under objection, there are two means of identifying them from the CRA information systems. First, all active objections have a notional RAP [N] in CORTAX showing for the year under objection. The second indicator is in the file charge-out system. The file would be charged out to Appeals. If the RTA does not have access to these systems, the RTM or FR or control centre (CC) could help.

If the RTA finds out that either indicator is in CORTAX, they could then contact Appeals to see if the objection was related to SR&ED and whether the decision might affect the year under review.

Sometimes appeals can inform the RTA when a decision on the active objection can be expected. Whether the decision is imminent or not could affect how the RTA proceeds with the review.

Normally, the T2 file will include the NOO and all of the Appeals reports. An exception occurs when Appeals anticipates a Court challenge by the claimant and keeps their package until the issue is settled.

2. Basic principles

There are a few basic principles to consider when objections or court cases are involved:

• It is recommended that the current year review not be delayed as a result of the objection, unless requested by the claimant;
• Objections may result in additional information becoming available. This information should be considered during the "regular" review; and
• Any deficiencies with respect to defensibility or due process noted during past Appeals reviews should be corrected by the RTA.

When the RTA knows of an outstanding or prior objection that relates to a previous technical decision, this should be taken into consideration in conducting the review for the current year’s claim. The RTA should consult the RTM as well as the FR in order to determine the best review strategy. Delays may need to be added to Audit Information Management System (AIMS).

It is CRA policy that reviewers, whether financial or technical, must not try to interfere with the Appeals process, for example, to attempt to settle the issue for the Appeals Division, or to try to influence the decision of the Appeals reviewer. However, it is acceptable to contact Appeals in matters relating to the facts. It may be beneficial to inform Appeals of the outcome of the current year’s claim review as it may make it easier for them to resolve outstanding objections.

3. Completed objections

There are two basic situations:

• The prior years’ objections have been resolved, and the Appeals review supported the original decision. If this is the case, the RTA can proceed with the review without any special considerations.
• The prior year objections have been resolved, but the Appeals review does not completely support the original decision, and the issues / projects continue into subsequent years. In this situation, the RTA should note why the original decision was not supported, and in subsequent reviews correct the weaknesses noted by the Appeals review.

If the RTA thinks that certain factors distinguish the current issues / projects from the prior Appeals review, the reasons should be documented and approved by the RTM before the review is concluded. If a decision contrary to Appeals is maintained, the reasons for the disagreement should be documented and supported by clear rationale.

If the CTSO accepts the claim in the current year as filed, this does not bind them to accept the claim in subsequent years as there is no decision on eligibility and each year’s claim is reviewed on its own merits. The letters sent to the claimant must make these points clear.

4. Active objections

a. Objections for a prior year:

Depending on the nature of the issues under objection, one of the following three options may apply:

• If no issues or projects relate to the objection, the review can proceed normally.
• If some issues or projects relate to the objection, the claimant should be given these two options:
  • Delaying the entire review until the Appeals decision(s) are available. The RTA would inform the claimant of the estimated delays (as informed by Appeals) and how the prior year objection and issue(s) affects the current year claim. In this case, a delay would be added in Audit Information Management System (AIMS).
  • Review the issues and projects not affected by the objection and treat the affected issues the way they were earlier treated by the RTA. The claimant would be informed that after the assessment they could then file an objection for the disputed work.

If the claimant provided additional information to the Appeals Division that was not provided during the "regular" review, the Appeals Division sends it to the RTA who can consider whether they can change their original decision (resolve the issues in the claimant’s favour) on the basis of this new information. If this can be done, then the RTA with Appeals and the RTM can determine whether to proceed with the review. If a review is performed, the RTA must inform Appeals of the results; this may affect the results for the previous year.

b. Objections for the current year:

It is possible that there can be an outstanding objection for a current year claim. That is, a claim could be assessed, an objection filed, and the claimant later filed a requested adjustment for the same year within 18 months of the tax year end. In other words, there is an objection and an outstanding file for the same year. As for a prior year objection, normally the Appeals Branch would arrange contact with the RTA via the local AD, and the RTA must follow the instructions of the local Appeals Officer. The claimant must be informed that if they do not want to wait until the objection is resolved before the revised claim is processed, the reassessment for that year would cancel the objection, and a new objection would need to be made. These considerations apply:

• The additional work claimed relates to the issues and / or projects under objection and the previous objection can be accepted on the strength of the new information. Consider the relevance of any new information supplied that could relate to the previous objection. If the RTA can accept the additional work as filed, the Appeals Officer must be notified.
• The additional work claimed does not relate to the previous objection. The review can proceed normally, taking into consideration the administrative matters with the objection that are noted above.

5. RTA’s involvement with active objections

In some circumstances, the RTA may be directly involved with outstanding objections.

Appeals may request that the year under objection be reviewed with the current year claim. Therefore, the RTA may be involved in the review of a file with an outstanding objection for a prior year. Such work is only done on request and under the direction of the Appeals Branch. Normally the Appeals Branch arranges the review via the local AD. The RTA must follow the instructions of the local Appeals Officer if this happens. This is possible when:

• A determination on the work has not been previously given, as the claim was disallowed as incomplete or for lack of information. Thus, the RTA’s review essentially constitutes a first review. If the review by the RTA is unfavourable, Appeals will do another review without further involvement of the TSO or RTA; or
• Appeals requests that the RTA review additional information received with the objection, with a view to determine whether they can accept the objection on the strength of the new information. If a favourable determination cannot be given, Appeals will then give the claim a second review; or
• There is an objection for a current year claim.

6. Court cases

If the original decision by the RTA is appealed to the Tax Court and the original review is not supported by the court, subsequent reviews must correct the weaknesses of the original review. The RTA must discuss this with the RTM. In some cases, the result of the court decision may set a precedent and requires a change to the CRA administrative policy or interpretation of the legislation. If this happens, the RTA will receive instructions from management, and future reviews concerning this issue must be done according to the new policy.

6.2 Bankruptcies, company shut down, or facility sold

In situations such as bankruptcies, company shut down, or facility being sold it may be difficult to obtain required information. A physical facility may no longer exist and personnel may no longer be available. Former R&D personnel may not be available to provide information. In the case of bankruptcy, the records and equipment may have been seized or dispersed. If the records and equipment still exist, it may be possible to arrange an inspection via the trustees or the new owners. In this situation, while the evidence may be limited, the onus is still on the claimant to support their position to the best of their ability. The RTA must rely on the available evidence and make an appropriate determination using professional judgement. On the other hand, sometimes if the facility is sold the work could continue under a new organization, so that a company bankruptcy does not necessarily mean that work on the project has ended. If it has ended, that is a factor in evaluating risk.

6.3 Out-of-country equipment, records or personnel

Sometimes the claimant is a multinational company and relevant records or personnel are outside of Canada. In other cases, the facility is sold and the operations are moved out of Canada. The claimant’s obligation to support their claim is not diminished by a move outside of the country, and the CRA is usually not obligated to pay for travel outside of the country (even though some exceptions exist). In such a case, the claimant has the option of bringing their books and records, and / or personnel to Canada, or the option of paying the CRA for any required travel to perform the review. Out-of-country travel is subject to certain administrative approval procedures or requirements, and if this is contemplated, it must be discussed with and approved by the RTM and then by the AD.

6.4 No existing physical facility

Sometimes a physical facility does not exist or never existed. This can be the case with a small one-person operation, where the majority of the work was subcontracted or where the majority of the work was software development. The review will only consist of the inspection of books, records and supporting evidence, and interview(s) with the claimant. There may be no real benefit to visiting the place of business. In this situation, arrangements for the review can be made at an alternative location, including the CRA’s premises.

In this context when the work claimed by one party was done under contract for them by another party, such as a contract for SR&ED, or claimed as overhead under the traditional method, or is a third-party payment, the RTA is allowed under the Act to speak to the contractor, the contractor’s technical staff, or whatever organization is performing the claimed SR&ED. However, the onus is on the claimant to obtain needed information on work done on their behalf.

6.5 Remote claimant location

In some situations, the claimant’s facility may be difficult and expensive to access, or for security and / or health concerns, it may be difficult to visit. In these situations, alternate means of resolving the issues can be arranged. For example, the claimant could bring books and records to the CRA’s premises or another location, or send videos or photos. It also may be possible to arrange a videoconference in one of the CRA videoconferencing or teleconferencing facilities.

6.6 Separation of head office from R&D site

This may be the organizational structure of the company. Therefore, it may be possible to inspect the supporting evidence and talk to the necessary individuals without actually visiting the R&D site.

6.7 Borrowing claimant’s records

It may be necessary to borrow the claimant's records to conduct a review, although this is infrequent. Refer to the CRA Audit Manual (Chapter 10.2.6) for details on the administrative procedures required if books and records are borrowed. The most important consideration if this is done is that the books and records be identified in detail, the claimant is given a receipt indicating what was borrowed, and that the claimant signs off the receipt when the CRA returns the records. The usually security precautions for claimant information apply for these records, particularly since they are original records. If the claimant brings the books and records to the CRA offices, they can be inspected and discussed with the claimant and immediately returned.

6.8 Claimant’s documentation supplied as electronic media

Electronic media from outside the CRA cannot be used in CRA systems without following CRA security procedures. Consult the local IT group if it is necessary to access this information.

6.9 Claims involving classified information

In some cases, a review will require access to information that has a national security classification. In such situations, project descriptions are not sent to the CRA by the claimant, but the claimant notifies the CRA of the situation by letter. The RTA should refer these situations to the RTM. If the descriptions and the work are to be reviewed, an RTA with appropriate clearance must review them on the claimant’s secure premises. Documentation kept in the CRA files must not contain classified information.

6.10 Second technical review by a new RTA

Sometimes a second RTA is involved in the file. That might be because the AD has requested a second technical review, or the first RTA is unable to complete the work. The review by the second RTA, in principle, uses the same procedures described in the CRM. Where the second RTA is involved as part of an administrative second review procedure, the main consideration is that the second RTA to the extent possible is not influenced by the work of the first RTA; it should be an independent review as much as possible. The second RTA would be aware of the previous work and not request the same information from the claimant a second time. In other situations, the second RTA may be able to rely to some extent on the work of the first RTA. The RTA should discuss these situations with the RTM.

6.11 Partnership claims

If there is a partnership, there are a few procedural differences in how the review is conducted. Most of the additional procedures are the responsibility of the FR and the Control Function (CF), not the RTA. Chapter 7.5, Appendix 5 of the Financial Claim Review Manual (FCRM) has more details. This section is only focussed on what the RTA does.

The key points to keep in mind are mentioned in the FCRM, as follows:

"Where SR&ED is undertaken by or on behalf of a partnership, Form T661, Scientific Research and Experimental Development (SR&ED) Expenditures Claim, must be prepared at the partnership level, detailing the SR&ED expenditures incurred by the partnership. The financial reviewer (FR) and the research and technology advisor (RTA) review the claim at the partnership level, but the adjustments to income and investment tax credits (ITC) flow through to the members. Form T661 must be submitted with the Partnership Information Return (PIR) - T5013, if such a return is required; otherwise the onus lies with each member to file the partnership’s form T661 with their income tax return for the year."

For the RTA, the starting point of the review is when the partnership claim is referred to them by the CF. If claimant contact is needed, the RTA should contact the person listed on Line 115 of the T661. The legal basis for a partnership is the partnership agreement, which sets out each partner’s rights and obligations and their share of the partnership. The nature of this agreement is generally not relevant to the RTA. The only relevant aspect of the agreement is with respect to what part of the claimed SR&ED work, if any, is done by some or all of the partners. Work could also be done by contractors or third parties. Work done by an individual partner would not have to be SR&ED on its own; the RTA only needs to consider how the work of each partner (if any of the partners are doing any of the work) relates to the claimed SR&ED project as a whole. How the review is conducted, such as places visited, would depend on the unique features of each partnership. The review itself would be conducted according to the same procedures as any other review.

Individual partners may have different rights and obligations under their agreement. Similarly, the SR&ED review report must only be discussed with or given to the partnership, not to individual partners. In this respect, in terms of information exchange, the individual partners would be treated in the same way as employees of a company. It is the responsibility of the partnership to distribute the report to the partners.

The SR&ED Review report template is slightly modified for partnership claims (discussed in Chapter 6.9.3). Specifically Section 1, the identification section, would use different headings, and the case selection reason is always 0406. Note that the names of the individual partners and their Business numbers/SINs are not needed but can be included in section 10 of the report, remembering to replace the first six digits of any SIN with "XXX XXX". The remainder of the report template is unchanged, and the review is otherwise conducted in exactly the same way.

Partnership claims and AIMS

A case is set up in AIMS for the partnership, using selection reason code 0406 and the partnership’s business number (BN) if it files a T5013 return, or the BN or social insurance number (SIN) of one of the members. The information on screen L for a partnership case always represents the entire partnership claim. That is, the codes relevant to the technical part of the review , "Science Review Type" and "Activity Determination Code", apply to the partnership as a whole.

When a partner also has their own SR&ED Claim

It is possible that one of the partners also has a separate SR&ED claim under their own name. In this situation, an additional concern of the RTA could be if the claimant’s supporting evidence was inadequate to separate the work, equipment and materials for the partnership from that of the separate SR&ED claim. All the discussion in the CRM concerning missing or inadequate supporting evidence, such as in Chapter 5.12, applies in this situation as well. Therefore the claim for the work of a partner, and/or the partner’s own SR&ED claim, can be considered unsubstantiated if the supporting evidence is insufficient to establish what was done and/or by who.

Appendix A.7: Considerations during the on-site visit

Following the interview with the claimant during the on-site visit, it is recommended to review the information obtained with the following questions in mind, before the visit is concluded:

• Is any of the review information unclear or inconsistent with other information obtained before or during the interview?
• Are the claimed labour, materials, capital equipment, supplies and other SR&ED costs realistic and reasonable for the activities claimed in the project?
• For the type and scale of projects of this claim, what kind of evidence would reasonably be expected to be present and would be useful towards establishing the project eligibility and work undertaken by the claimant?
• Can the information obtained by way of the interview(s) be substantiated by the actual evidence and supporting documentation provided by the claimant? Is the evidence consistent?
• What assumptions, if any, might now be necessary to support the analyses, and do the assumptions need validation?
• Did each of the individuals claimed as involved in each project make a direct contribution to the SR&ED? What was the nature and extent of their contributions (for example, directly engaged, technical support, service support, general labour, clerical)?
• What factors and considerations need to be taken into account to establish the "business context" of the claimant in relation to their claimed SR&ED?
• Has the claimant claimed only SR&ED projects? That is, does each project as claimed reasonably represent all and only the work required to resolve a clearly defined Scientific or Technological (S/T) uncertainty and to seek a related and clearly defined Scientific or Technological Advancement (S/TA) by way of a systematic experimental and/or analytical investigation?
• What field of science or technology is the SR&ED claimed in? Is it a multi-disciplinary area of science or technology? Is it in an excluded field? Is the SR&ED in the identified field?
• For work that is SR&ED, what is the best way to describe the actual (as identified by the RTA) S / T uncertainty or research question posed by the claimant for each project?
• Does the RTA think that the Scientific or Technological Uncertainty (S / TU) provided by the claimant is correctly and accurately identified, rather than being a business or other uncertainty? If given as the latter, does the claimant’s stated uncertainty have a direct link to an apparent or identifiable underlying S / TU (that is, identifiable by the RTA)? If this is the case, did the interview bring out the important relationship(s) between the technological development goals and specific S / T research objectives? Note that there is a distinction between a technological uncertainty, which relates to a technological obstacle or barrier, and a technical uncertainty, which relates to questions as to the results or outcome of the work, such as the commercial objectives.
• Does the RTA think that the S / TA provided by the claimant is correctly and accurately identified, and not a business or other goal, achievement or desired outcome? If given as the latter, does this goal or desired achievement have a direct link to an apparent or identifiable underlying S / TA (that is, identifiable by the RTA) in a field of science or technology which is not excluded by the definition of SR&ED? and
• Is there a clear relationship between the claimed S / TU and the claimed S / TA? When the S / TU and the S / TA are about different issues or topics, it is possible that the project as claimed is too broad, or includes work that lies outside the goals of a specific SR&ED project.

Appendix A.8: Mutual Expectations: Claimant and RTA

Working with claimants – Mutual Expectations between the caimant and the Research and Technology Advisor during an SR&ED Review

The SR&ED Review will be more effective and efficient when both parties are clear about what they can expect from each other. The Research and Technology Advisor (RTA) is expected to work with claimants, and the claimant is also expected to work with the RTA. It is important that, at the start of a review, the RTA explain to and discuss with the claimant these mutual expectations.

During the SR&ED review, RTAs will work with the claimants to:

• explain the SR&ED program, its requirements, its services and policies to claimants who would like more information about the program, to encourage understanding of their entitlements and ensure compliance;
• identify, prior to the on-site visit, issues that they plan to address and their approach for addressing the issues;
• identify, prior to the on-site visit, what they need to see and discuss during the visit and indicate whether it is information from personnel who worked on the projects, or supporting evidence, or both, so that the claimant can be prepared for the review;
• determine the best people to speak to during the review;
• identify, as early as possible, any new issues that arise during the review;
• identify ways to resolve review issues, such as questions to ask or supporting evidence to examine;
• provide an indication of any concerns that remain at the end of the on-site visit or, if unable to do so until the information gathered during the review is considered, indicate when they expect to be able to do so;
• give an explanation for decisions, with reasons, in writing, if any of the work is not considered to be SR&ED, or if any other decisions are unfavourable to the claimant. This will help to improve claimant’s understanding of program requirements and enable them to be better positioned to provide any factual information that had not been considered in the RTA’s decision;
• coordinate their review work, including information requests, with Financial Reviewers (FRs) to minimize the administrative burden, such as not repeatedly requesting the same information from the claimant;
• allow a claimant the opportunity to provide additional information or explanations in response to their decisions, and to respond to the claimant concerning this additional representation; and
• provide feedback, advice and guidance to claimants, as required, to explain any deficiencies in the documentation or in the project information.

During the SR&ED review, the claimants and their representatives will be expected to:

• comply with the SR&ED Program requirements;
• prepare for on-site visits by having requested information, evidence or personnel available;
• prepare for the possibility of an expanded or shortened review by the RTA as different issues arise during the review or the original ones are resolved;
• provide, as early as possible in the review process, information or evidence relevant to supporting their position;
• answer questions and address the issues identified by the RTA during the review;
• ensure that the people who are best able to explain the work done are available to be interviewed by the RTA, should other issues arise during the review process;
• ensure that documentation created during the execution of the SR&ED work claimed is available and organized for review by the RTA and that someone is available to explain the significance of the documentation;
• prepare to explain how the claim was put together and what supporting evidence was used in the preparation of the claim;
• focus on the review issues identified by the RTA and facts related to the work done in order to address these issues;
• provide complete responses to questions asked by the RTA, whether in writing or not, within a reasonable time frame;
• expedite the review by providing any information, on a timely basis, that supports the claim;
• address any concerns raised by the RTA with respect to the quality of project descriptions, claim organization or maintaining supporting evidence for future claims; and
• advise the RTA of any concerns as early as possible.

Appendix A.9: List of websites

• Access to Information Act
• Audit Information Management System (AIMS): AIMS Online Guide
• Claimant Services Standards (TOM 3980): Service standards
• CORTAX, the CRA system for accessing T2 (corporation) information:
  
• CRA Occupational Health and Safety Policies
• Dispute Resolution with the CRA: Complaints and disputes
• Enterprise Risk Management Policy: The CRA policy for managing risk,
• Finance and Administration Manual, Security Volume
• Finance and Administration Manual, Security Volume, Security Incident Reporting and Management Directive
• Finance and Administration Manual, Security Volume, Transmittal and Transport of Protected and Classified Information and Assets Standards
• Finance and Administration Manual, Security Volume, Abuse, Threats, Stalking and Assaults against Employees Policy
• Form RC59 "Business Consent Form": RC59
• Form T1013 "Authorizing or cancelling a representative": T1013
• Income Tax Act
• Knotia
• Privacy Act
• Process Review
• Protection of Client Information: Client Information
• Quality Assurance Section of the Program Administration Division of the SR&ED Directorate.
• RAPID, the CRA system for accessing non-T2 and other information:
  
• Security Incident Report, Form RC 166
• SR&ED Course 1170-000
• SR&ED Reference Guide: SR&ED Reference Guide. This includes a list of current publications, directives and Application Policies.
• SR&ED Risk Management Tool, the information system where the initial risk assessment provided by TC may be accessed: SR&ED Risk Management Tool User Manual
• SR&ED Public Website: SR&ED
• Stakeholder Relations Division of the SR&ED Directorate: Stakeholder Relations Division
• Tax Court of Canada
• Taxpayer Bill of Rights.
• Transmittal of sensitive information: Security of Scientific and Technological Information.
• Treasury Board Guidelines on Occupation Health and Safety: Treasury Board Guidelines

Appendix B

Appendix B.1: Revisions

1. 1 Explanation of changes

The following are the explanation of changes to the Claim Review Manual for Research and Technology Advisors as part of the revision of April 21, 2015.

Chapters 1 and 2 have been revised to clarify Agency guidelines regarding compliance approaches, email communications and Access to Information and Privacy (ATIP) in addition to clarifying definitions for "determination", "conclusion" and "decision".

Chapter 3 has been revised to include information on joint technical-financial issues.

Chapter 4 has been revised to include information on risk assessment and review issues in addition to clarifying procedures regarding review plan requirements and approval. The section on "claims involving a large number of projects" was clarified. The section on "consideration for large claims" was deleted. The first-time claimant advisory service (FTCAS) service is also included.

Chapter 5 has been revised to clarify procedures regarding requests for information (RFI), reviews with or without onsite visits, and communicating decisions to the claimant to improve transparency and consistency. In addition, new sections describing FTCAS and claimant’s supporting evidence and oral information have been added.

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Date modified:

2015-04-20