Journal of
Accounting and Taxation

  • Abbreviation: J. Account. Taxation
  • Language: English
  • ISSN: 2141-6664
  • DOI: 10.5897/JAT
  • Start Year: 2009
  • Published Articles: 115

Review

Practical documentation of qualifying research activities for the SR&ED tax credit

Jamie Nickerson
  • Jamie Nickerson
  • Swanson Reed - Specialist R&D Tax Advisors, Canada.
  • Google Scholar
Adam Rogers
  • Adam Rogers
  • Swanson Reed - Specialist R&D Tax Advisors, Canada.
  • Google Scholar
Amber Farrington
  • Amber Farrington
  • Swanson Reed - Specialist R&D Tax Advisors, Canada.
  • Google Scholar
Anne Nguyen
  • Anne Nguyen
  • Swanson Reed - Specialist R&D Tax Advisors, Canada.
  • Google Scholar


  •  Received: 10 August 2018
  •  Accepted: 21 November 2018
  •  Published: 31 January 2019

Abstract

The Canadian tax program for Scientific Research and Experimental Development (SR&ED) is a crucial component of Canadian economic policy as it encourages domestic companies to engage in risk-taking initiatives through tax incentives such as credits. While the SR&ED program has evolved over the decades, the SR&ED Five Questions have established the principal criteria that determine the eligibility of an SR&ED claim. The key take-away points of this paper are that the Canada Revenue Agency is progressively becoming more particular and stringent when reviewing SR&ED claims and in light of this trend, documentation is becoming ever important in the substantiation of SR&ED claims.  Although not required with submission, documentation provides taxpayers with evidence to support their claims in the case of a CRA or court challenge. In the event of an audit, a taxpayer must prove that its SR&ED activities are eligible and meets the “Five Question Test.” As this paper argues, recent case law has shown the importance of clear and relevant supporting evidence, especially documentation, in substantiating that an SR&ED project meets the Five Questions criteria.

 

Key words: Tax, taxation, research and development, accounting, incentive, tax credit, canada, scientific research and experimental development.