By Dmitry Brusilovsky, CEO, SRED Unlimited
Recently, the CRA yet again changed their SR&ED procedures. Fortunately, the eligibility criteria remains intact: there’s no difference in what qualifies as SR&ED. However, what they’ve done is clarified how they evaluate claims. Hopefully, this will make for a less confusing process from a claimant perspective. They’re most likely further emphasizing/renewing their focus on technical documentation. The following five practical questions should help illustrate what they are looking for.
1. Did you identify a technological or scientific uncertainty which could not be solved with easily Googled procedures,or removed by best practices?
- Show the work which led to the identification of this technological uncertainty. Particularly the point where you realized why it could not be resolved with best practices or using the company knowledge base.
- It can also help to show that you tried other processes and proved that they would not work.
2. As a result of this “due diligence”, did you then formulate hypotheses specifically aimed at reducing or eliminating this uncertainty?
- Include the idea which you wanted to prove or disprove when beginning your investigation.
3. Were your testing procedures consistent with the general scientific method, including formulating, testing, and modifying hypotheses?
- Imagine a high school lab journal that follows a standard process. Chances are, your technical team already does this, but they mentally record and process some of the steps instead of writing them down. Ideally, you should have documentation of the whole process, skipping no step,to show the CRA your entire process. Don’t leave opportunities for them to ask questions if you can help it.
4. Did you advance the technology as a result of this experimental process? Did you at least advance your understanding of the technology?
- In the SR&ED world, it’s okay if a hypothesis fails. As long as you gain reusable knowledge about the technology, your documentation can show that. If it’s an ongoing project, and you’re still in the thick of things by the end of the fiscal year, instead you can document where the project left off before the year-end and describe your discoveries so far.
5. Has every iteration of hypothesis and all test results been documented?
- This may seem redundant, but we can’t over-stress that you must document as much as you can—ideally, document everything. Otherwise, “yes” answers to the previous questions may not be enough to defend your claim.