Did you know that even a daily “to do” list, with technical details included on it, could make a critical difference to enable you to claim SR&ED? In fact, the current approach to evidence for SR&ED looks as though it may unreasonably deny many small businesses proper access to the SR&ED tax incentives. It’s unfortunate, but it’s also avoidable.
The Canada Revenue Agency (CRA) has been placing increased emphasis on what they call “contemporaneous evidence”, by which they mean “evidence that is produced while the work is going on”. Based on what I’ve been hearing, the tax authority (CRA) has been demanding a level of supporting evidence that would do justice to an academic university study, including formal documentation of the initial hypothesis, the approaches considered, technical records of the work performed, and the outcomes. Basically, they’re looking for documentation at every stage, and documentation that is focused on the technical issues and challenges, rather than the business reasons or business issues that would have led you to do the work in the first place.
Reporting activities are driven by accountability. If you stop and think about it: who writes such emails and status reports, usually? And to whom? In medium-sized and large businesses, people write these things, and keep such artifacts, because the writers are accountable to somebody else for the money or effort they are investing, and for the outcome of their work.
To be continued...
Bruce Madole