The Canada Revenue Agency (CRA) administers the Scientific Research and Experimental Development (SR&ED) tax incentive program on behalf of the Government of Canada. The CRA is committed to informing businesses in Canada about available incentives, making them easily accessible, and managing the SR&ED program with fiscal integrity. In response to Economic Action Plan 2012, the CRA is taking the following steps to improve the predictability of the outcome of SR&ED claims:
- conducting a pilot project to determine the feasibility of a formal pre-approval process;
- enhancing the on-line eligibility self-assessment tool;
- improving the Notice of Objection process; and
- working collaboratively with industry representatives to address emerging issues.
Formal pre-approval process (FPAP) service
The CRA understands that businesses would like to have more certainty about whether their claim qualifies for the SR&ED investment tax credits. To respond to this need, the CRA is looking at the feasibility of a formal pre-approval process (FPAP). The CRA will test the concept through a pilot project that will begin during the spring of 2013.
The proposed FPAP service will provide enhanced predictability of the eligibility of an entire SR&ED claim or a specific project. The CRA will work with claimants in real time to help determine what work and expenditures are eligible for SR&ED investment tax credits and what supporting evidence is required. If the pilot project is successful, the proposed FPAP service should result in faster claim processing as it will eliminate the need for a post-filing, on-site review of SR&ED claims.
In order to test and evaluate the proposed FPAP service and ensure that it meets the needs of claimants, the CRA is currently seeking participants for the FPAP pilot project. Information about the pilot project and the possibility of participating can be found on the CRA web site.
On-line eligibility self-assessment tool (ESAT)
The CRA is enhancing the on-line eligibility self-assessment tool (ESAT) that has been available since 2008. The enhanced ESAT will continue to help claimants to determine if the research and development work that has been done has the potential to satisfy the requirements of the SR&ED program. It has been designed to help claimants to better understand the SR&ED policy on the eligibility of research and development work and to determine in a practical way how it applies to a particular business. The enhanced ESAT could also assist claimants in completing Form T661, Scientific Research and Experimental Development (SR&ED) Expenditures Claim. Several members of the SR&ED community will be testing a preliminary version of the tool and providing feedback before the enhanced ESAT is made available on the CRA Web site.
Notices of Objection for claims
The CRA has improved the review process for Notices of Objection related to the scientific eligibility of SR&ED claims. The CRA has hired additional scientific staff with a broad range of science and engineering expertise who can perform a more specialized review in addressing the SR&ED scientific eligibility issues that claimants have raised in their Notices of Objection. The reviews have also been expanded to provide for greater contact between the CRA’s SR&ED scientific staff and the claimants.
Collaboration: listening to stakeholders
The CRA continues to meet with industry representatives to discuss and address emerging SR&ED issues. For example, in October 2012, the CRA held a forum for the oil and gas and mining industry. One of the objectives of the forum was to discuss issues of importance to both the CRA and the industry related to the SR&ED program.
The CRA also jointly developed with SR&ED stakeholders case studies on emerging technical issues for discussion at the forthcoming Association de planification fiscale et financière (APFF) SR&ED Symposium to be held in Montreal, Quebec, in February 2013.
Policy Review Project
Following nearly 16 months of public consultations, in December 2012, the CRA announced the successful completion of its SR&ED Policy Review Project and released consolidated SR&ED policy documents. None of the principles were changed, but the text was re-written to improve clarity and readability. The policy information was reformatted and restructured and is now presented in a user-friendly way on the CRA Web site. The new format of the policy documents makes it easier for the CRA to update them regularly to reflect legislative changes and to facilitate understanding through, for instance, the addition of more examples.