You need to be prepared to frame or limit the due diligence discussion by creating and keeping clear evidence about the work you do – from the due diligence work to the point at which you actually begin experimental development, including notes about the framing of your technical hypothesis, various approaches considered, and so on.
Failing to keep good evidence of the SR&ED work may allow CRA to expand the scope of what they describe as due diligence beyond what seems reasonable to you. The definition of due diligence itself is elastic – it expands up to the limits imposed by actual evidence of SR&ED.
Due diligence should perhaps also be defined as the effort you need to spend on properly documenting and capturing your technical work, if only to ensure that there are reasonable limits to the application of the due diligence phrase, and to ensure that SR&ED work is clearly recognizable where and when it begins.
Bruce Madole