How to Avoid a SR&ED Review
Most companies that have gone through an audit of their SR&ED claim by CRA will likely say that the process was not pleasant and disincentive. Although, it may not always be possible to avoid a SR&ED audit, there are proactive steps that your company can take minimize the chances of having one or be audit-ready if your claim is selected for review.
Bear in mind that a review of your SR&ED claim does not trigger a full tax audit as these are an isolated review and only covers the projects selected from your claim. Although SR&ED claim reviews have been more frequent in recent years, you can easily minimize and even avoid an unnecessary CRA review by being prepared.
- Track your SR&ED projects in real-time throughout the year. Having a robust system that follows your normal workflow will ensure that tracking mechanisms are being followed.
- Ensure the systematic investigation is indicated in the project description.
- Keep detailed records of project activities.
- Avoid using audit triggering words.
- Include detailed description of the subcontractor’s contribution to the project.
- Use a SR&ED consultant who can assist improving your documentation procedures to ensure that you are capturing and can support all your eligible activities and time.
The chance of having your SR&ED claim audited at least once every 5 years is over 90 per cent. As the SR&ED credits may be a critical part of your company’s continued growth, Fundright will be there to assist in case of an audit with pre-review consultation, and presence during the review to ensure we can support you all the way. The rules involved in claiming SR&ED expenditures and related investment tax credits are quite complex, it may not always be easy to understand if your company’s projects qualify.
