SR&ED Reviews

FTCAS (First-time claimant advisory service)
All companies filing for the SR&ED Tax Credit for the first time in Canada will be subject to the FTCAS. If anyone informs you that this can be skipped or you will not be selected for the FTCAS is incorrect, as CRA is doing their due diligence.

The FTCAS is a review conducted by a technical reviewer as well as a financial reviewer from CRA. The goal of both reviewers is to educate the company on the SR&ED Tax Credit. Once completed, both reviewers will ask some questions about the SR&ED claim submitted by the company. Braithwaite will be in attendance for the FTCAS, but the reviewers only want to hear from the company that submitted the claim. Once the FTCAS is completed, the reviewers may provide some important notes on how to improve the claim for next year. The claim is now approved by CRA, and your refund will be sent in four to six weeks.

CAS (Claim advisory service)
Similar to an FTCAS, a CAS review is for companies that have not claimed an SR&ED Tax Credit in a minimum of three years. Companies also affected are long-standing SR&ED filers that CRA has not spoken to in 3-5 years. In both instances, a CCPC and a non-CCPC can be selected, CRA does not favour one over the other. CRA is doing its due diligence to determine if the company is still aware of the SR&ED Tax Credit.

The review will be conducted by both a technical reviewer and a financial reviewer. An education portion will take place along with questions about the SR&ED claim submitted. Once the meeting is over, important notes if any on how to improve the claim will be provided to the company. A refund on your approved SR&ED claim will be sent in four to six weeks.

Financial Review
From time to time, CRA may select your SR&ED claim for a financial review. This may be triggered by a double or triple in the claim size from the previous year, additional grants or funding may have been used by the company or an increase in SR&ED time allocated to projects (these are but a few examples).

CRA will be specific in the review letter they send to the company. Sometimes, they may ask for the information beforehand and if everything is answered to the financial reviewers’ liking, the claim will be approved without having to have a meeting. If the financial reviewer is not satisfied with the given financial material for the SR&ED claim, the review will take place.

During the review, if the financial reviewer is still not comfortable with the provided information, this can trigger an audit where a technical reviewer will now be assigned to the case.

Technical Review
From time to time, CRA may select your SR&ED claim for a technical review. The financials are strong but CRA is not too sure your SR&ED projects are deemed a scientific advancement (basic research, applied research, and/or experimental development).

Just like the financial review, the technical reviewer will provide a detailed letter outlining what is required from the company. If the information sent to the client is satisfactory to the technical reviewer, the claim will be approved. If not, a review date will be decided to explain further the SR&ED project(s) submitted.

When the review is conducted, the technical reviewer just like the financial reviewer may decide what is presented is not SR&ED eligible and a full audit will be determined bringing in a financial reviewer.

Audit
When a company is selected for an SR&ED audit, CRA will provide a detailed letter on the project(s) that are in question as well as any financial issues.

An audit may be triggered by the following points:

1. SR&ED project(s) are weak and seem ineligible (routine work, maintenance, etc.)
2. The claim has substantially increased in size
3. Multiple grants and SR&ED were claimed in the same year
4. Increase in subcontractor costs
5. A portion of the claim has moved overseas
6. Due diligence by CRA as your company has not been reviewed in years

Audits usually take half a day to a day for all questions by the two reviewers to be answered. The turnaround may not be as fast as an FTCAS or a CAS as those are more on educating the company. Once the meeting is over, the reviewers may come back and ask additional questions. After the whole process is completed, the claim can be deemed 100% eligible, a portion of the claim can be cut, or the entire claim is ineligible and will be denied.