Every time you have a SR&ED claim submitted, there will always be a chance that the Canada Revenue Agency(CRA) would demand to perform a review of that claim in a more detailed manner and guarantee that you have met the program’s requirements.
When a project has been completed and a claim has been submitted, any organization might have to face some eligibility risk when one or multiple projects do not qualify in accordance to SR&ED requirements. There will always be a possibility that the CRA demands to perform a more detailed review of the claim.
In case you don’t know, CRA performs close screening on the validity of every submitted claim in order to guarantee that the work being claimed meets the program’s requirements. It is a known fact that not all or not every claim will be audited or reviewed. CRA is basically focusing on those claims, which have greater risk factors.
So, if you are one of those businesses looking to submit a claim, you must be well prepared for the SR&ED Audit. If not, then you have to make sure that you understand first the CRA SR&ED Audit process and become aware about the possible things you should expect from it so as to prevent facing any surprises.
To start with, keep in mind that being chosen for a CRA SR&ED Audit does not necessarily mean that your financial statements and company will be completely audited. Always remember that as you start with your preparation for the process, you have to get the reviewers to assist you. This means you have to display the least level of diligence within your record keeping along with enough knowledge about the best practices of Research and Development. The main point is that during the review, a SR&ED claim will highly likely be adjusted.
3 Types of CRA SR&ED Audits:
• Desktop Review – This involves reading through your tax forms for accuracy and eligibility.
• Financial Review – This is when a Financial Reviewer looks through the costs linked to your project making sure that they are eligible expenditures of SR&ED.
• Financial And Technical Review – This is when CRA arranges a site visit and interviewing your technical people who have participated in the work. Upon CRA visit, Technical reviewer (RTA) will briefly talk about SR&ED program, ask for a site tour (if possible), goes through the technical narratives of each project and check the supporting evidences. Financial reviewer may ask for payroll information, dated invoices for claimed materials and subcontractors, time sheets, etc.
CRA SR&ED Audits are quite common and you have no reason to be afraid of it. You have to keep in mind that being chosen for audit may result in extension of your SR&ED claim process.
If your SR&ED claim has been audited or reviewed in the past or seeking for risk analysis of your current SR&ED claim, do not hesitate to Contact Kelid™ and seek for professional advice. For further information for eligibility of your projects check out our Assessment LookUP. If you have any concerns regarding CRA SR&ED Audit that you feel can help other people in similar situations, leave a comment below.