It’s a new year and it helps to go into it with a clear head. If you can get past one common point of confusion, then your 2015 could turn out that much brighter.
Common misconception: Accepted as filed = SR&ED-eligible work
Since the process of claiming SR&ED appears labyrinthine and frustrating to the layperson, it’s no wonder claimants hold out hope for some simple way to predetermine the eligibility of their SR&ED claim. If work of a similar nature was claimed in previous years, and accepted as filed, doesn’t that clarify things? The CRA must have seen the claim as so solid that they need not spend the time to audit, and that should provide some clue about what future claimed projects will be accepted as filed.
Unfortunately, it doesn’t work that way. You haven’t cracked the code. Nobody has, but you can gain an advantage by not falling into the same trap as many others.
Why would a SR&ED claim be accepted as filed if it’s not eligible?
If your SR&ED claim is accepted as filed, the CRA will send you a letter saying so. Read that letter closely, and it will also say that your project hasn’t been reviewed from a technical perspective. They simply accepted the financials as sound and opted not to examine the SR&ED claim more closely. There are a few reasons why they might do this.
One classic reason is that the high volume of claims renders them unable to check them all, and a certain number of claims will go through; the CRA recently hired more technical staff across the nation to reduce the likelihood of this.
If the size of your SR&ED claim is close to that of previous claims, perhaps higher but not alarmingly so, then you have likely avoided one red flag. If you have been through a technical review on one of your previous SR&ED claims, then the CRA might consider you to be at a low risk for filing ineligible work.
But the important thing to take away is that if a SR&ED claim is accepted as filed, then no checking was done to ensure its eligibility; it’s possible due to other factors that the CRA simply doesn’t consider you to be a high-risk claimant at that specific time.
Can I know if my SR&ED claim is eligible?
The best way to know, actually, is to have undergone a review and received a statement that your SR&ED claim is eligible. For the sake of your time and convenience, that may be a high price to pay for certainty. If you keep to high standards of technical documentation, and follow the CRA guidelines as best you can, that’s the best anyone can do.
If you’re new to claiming SR&ED and would like advice about documentation and interpreting guidelines, it helps to discuss these things with experienced consultants. Contact SRED Unlimited and see what the experts have to say.