By Dmitry Brusilovsky, CEO, SRED Unlimited
The CRA has recently changed how they do things in terms of SR&ED. Fortunately, they have not touched the eligibility criteria: what qualifies as SR&ED is the same as before. However, they have clarified the manner by which they evaluate claims. This should make the process less confusing for claimants. They likely formulated things this way to further emphasize their renewed focus on technical documentation. The following five questions should give a realistic impression of what they are looking for.
1. Did you identify a scientific or a technological uncertainty which could not be removed by best practices or easily Googled procedures?
- Be sure to show the work which led to the identification of this technological uncertainty, if possible. In particular, try to show the point where you realized why it could not be resolved with best practices and using the company knowledge base.
- It also helps to show that you tried other processes to prove that they would not work.
2. As a result of these due diligence efforts, did you then formulate hypotheses specifically aimed at reducing or eliminating this uncertainty?
- Include the idea which began your investigation to prove or disprove the idea.
3. Were your testing procedures consistent with the scientific method as a whole, including formulation, testing, and modification of hypotheses?
- Imagine a high school lab journal that follows a standard process. Chances are, your technical team already follows this process, but they keep some of the steps in memory instead of recording them. Any documentation you have of the whole process, skipping no step, is encouraged to show the CRA your entire process without leaving questions.
4. Did the experimental process result in any advancement of the technology? Did it at least advance your understanding of the technology?
- In the SR&ED world, it is not a problem if your hypothesis failed. As long as you have gained reusable knowledge about the technology, you can show that in documentation. If you are still in the thick of the process by the end of the fiscal year, you can instead document where the project left off before the year-end and elaborate on what you seem to have discovered so far.
5. Have you documented all iterations of hypotheses and all test results?
- This may seem redundant, but we cannot stress enough that you must document as much as you can—ideally, document all of the work. Otherwise, “yes” answers to the previous questions may not be enough to make your claim defensible.