G6 Consulting Inc Canada's R&D Tax Credit Experts
SR&ED FTCAS
A few years ago, the CRA announced a significant change to the administration of the SR&ED program. The CRA decided to start performing in-person reviews on all SR&ED claims it received from first time claimants to the program.
This represented a significant change in focus for SR&ED audits. SR&ED audits are a time-consuming exercise for SR&ED personnel. For each review, the CRA spends time preparing for the audit. They then deliver the audit at the claimant’s premises which can take from a couple hours to two days or more for claims with many complex projects. Then the CRA requires significant processing time post-audit especially if they were reducing or denying an SR&ED claim. The CRA prepares these negative decisions as though every negative file will be disputed deep into Tax Court.
The workload required to audit all first-time claims was too large for the CRA. It took too much focus away from their ongoing administration of ongoing regular SR&ED claim filers and those companies who only claim SRED periodically. To address this imbalance, the CRA started to make greater use of a program called FTCAS, First Time Claimant Advisory Service. Using FTCAS, the government schedules an in-person limited review with the claimant. But the government at the same time pre-approves the company’s SRED claim before the review. In the limited on-site review, the CRA will provide education on preparing a SRED claim properly. They will also go over the claim at a high level with the claimant company to point out areas for improvement for future claims. This streamlined FTCAS review process eliminates most of the preparation work that the CRA must undertake pre- and post- review for a full SR&ED audit. The CRA today uses a mix of FTCAS limited reviews and full SR&ED audits so that they can visit with and educate all first-time claimants yet still have cycles left over to review regular SR&ED claims efficiently.
You can see the focus change for CRA SR&ED audits. All first-time claims are reviewed, either with a full audit or with a limited FTCAS review. A lower percentage of ongoing claimants’ SR&ED submissions will be reviewed due to the workload of visiting all first-time claims.
It is therefore now more important than ever to prepare your first SR&ED claim with great care and precision. Garnering an FTCAS decision for your first SR&ED claim is important.
The FTCAS means that your claim is pre-approved, so you will receive the entire claim amount which you requested. You will receive this money much more quickly than if you had to undergo a full SR&ED audit for your first-time claim. Those are two obvious benefits of FTCAS: receive 100% of your grant money and receive that money faster.
The third and most important benefit of receiving an FTCAS rating is more subtle. You are putting yourself in the best position possible to achieve “Accepted as Filed” rulings for a string of your future SR&ED claims. You increase your chances of getting 100% of your SR&ED funding each year, shortly after you file your corporate taxes. SR&ED funding can then play a key role in funding your ongoing technology, engineering, innovation, and expansion planning.