How does SR&ED work with respect to reviews? A fundamental difference between SRED claims and a T2 submission is that any SRED review or audit is conducted before the SRED assessment is delivered. This is done deliberately by the CRA because SR&ED is an incentive program. The government wants firms to deploy SRED funding within the company immediately without setting aside a large portion of the funding to address later funding amendments or clawbacks.

All first time SRED claims are reviewed by the CRA. The review is either a full audit or an FTCAS. An FTCAS is much preferred, because it is composed of an SR&ED process whereby the claim submitted is approved as filed after the claimant goes through a mandatory training session with a CRA RTA and FA. The claim may be discussed in the FTCAS but it is not formally evaluated. More information on FTCAS here: https://www.g6consulting.ca/sred-ftcas/

When customers ask me “How does SRED work?” I tell them to focus on the technical side of their claim. 95% of a claim’s strength is based on the quality of qualifying work in the projects and also the evidence that backs up that work. The CRA has a $10 word which is very important for evidence called “contemporaneous”. Contemporaneous means generated when the work is performed. It’s vital for SRED practitioners to take dated notes and photos of work as they carry out the SRED work. As a very low tech example, it is simple to track your business car mileage if you make a habit of recording it daily. It’s difficult or impossible to track your mileage monthly or quarterly. It’s the same principle with SRED.