I have a theory about the documentary evidence required to support SR&ED claims, and it is this: if you want your work processes to create evidence that you are doing SR&ED, then you will have to tweak and evolve the processes themselves so that they include what I call the “SR&ED facts”. I’m talking about a change to the process itself, not merely to the results of the process.
The “SR&ED facts” are, generally, discussions about:
- technologies involved (technical capabilities and limitations, barriers, interoperability issues, etc.)
- technical work being performed (issues, approaches considered and attempted, missing knowledge, improvements sought, results and findings, etc) as well as
- technical activities of the people engaged in doing that technical work.
The CRA guidance documents suggest that “naturally arising” documents will be triggered in the process of doing the work, and that such documents may be used to support your claim for SR&ED. The reality is different. Mostly, if you produce what naturally arises, the CRA reviewers will remain unsatisfied, and will point to the dominance of business or functional issues as evidence that the work was, at best, routine.
Most companies work without producing documentation of any kind. Those that do produce something – emails, status reports, issue lists, project plans, etc. – almost invariably produce such things for business reasons. For example: delivery dates may be slipping, costs rising, quality benchmarks not met or in jeopardy, and so on.
In practice, the “naturally arising documents” just naturally tend to reflect the business concerns that are behind the work, concerns which probably drove the need to create the document that you would like to use as evidence.
Sometimes I think that there is something fundamentally flawed, or at least dualistic, about the Canada Revenue Agency (CRA) approach to supporting documentation, and the relationship between business needs and SR&ED. On the one hand, for a company to claim SR&ED at all, the work being done has to be related to the business of the claimant. That is, your business concerns are expected to drive your SR&ED. It’s mandatory. On the other hand, the documents that arise from that process are expected to somehow transcend those driving business concerns and to demonstrate (or contain the seeds of) a technology focus that will satisfy the need to demonstrate that technology work was going on, as claimed.
In fact, one science reviewer told me that by the time a reviewer asks to review the supporting documentation for a SR&ED claim, it’s almost a lost cause, and that if you haven’t made the case with your description of the uncertainties, advancements and work performed, the claim is pretty much on life support. So if you understand that your “supporting documentation” should be seen as something in the nature of a parachute, to be used when the claim is crashing, you would like to be sure that when you pull the rip-chord, what comes out of the parachute pack (or evidence file) is more useful to you than a pair of old socks and a ham sandwich. You want and need supporting documentation that will actually support and help you defend your claim.
If you capture and include some SR&ED facts while you’re doing the work, then you may still have a case to defend, once a claim starts going sideways.
Bruce Madole