There was a time when the CRA reviewers liked to refer to the concept of SR&ED “nuggets” – the idea that trying to identify that core technological uncertainty or advancement being pursued was like sifting through the gravel of routine work to find the claimable gold within. It was an interesting analogy, and a valuable concept, for educational purposes. The essential fact is that we can’t claim everything, sometimes you can’t claim anything, and the greatest challenge within the SR&ED program lies in trying to get the balance right.
I have a theory that successful claimants move through four stages in the evolution of the SR&ED program:
1. Awareness: claiming some of what you should (and gradually, less of what you shouldn’t); making due with existing documentary support, or the lack of it.
2. Effectiveness: claiming most of what you should, less of what you shouldn’t; documentary evidence varies in quality and scope; starting to make process adjustments to obtain more effective documentary support.
3. Self-compliance: claiming what you should, almost none of what you shouldn’t; solid evidence in support (both technical and financial); process improvement is a fact of life.
4. Maximized: claiming what you should, with solid evidence, and tightly integrated process support. Grey areas and marginal prospects are an area for negotiation and dialogue with tax authority.
Reaching this final stage implies that you have organized your efforts and processes to achieve a comprehensive identification, screening, and scoping effort, well integrated, with the technical and financial maturity to claim only the eligible bits. That’s full-bore SR&ED “mining”, and it takes a mature, committed, well-organized and well-supported effort to get there.
Bruce Madole