Strategic editing is necessary for tightening up SR&ED claims and lowering the overall CRA (Canada Revenue Agency) audit or review risk. Following are some trigger words that shall be removed from your project titles and technical narratives:
Words to be avoided when writing SR&ED Claims:
1-Try and Error
Trial and Error involves execution of number of tests in any order and not making it a part of a systematic plan;
Often the main cause of problem solving is trial and error. The objective of which is resolving the functional problem (which means to solve a problem in how something operates) instead of addressing this issue in the underlying technology which probably would have caused this issue. Every attempt of non-systematic testing teaches a lesson that “an option did not work.” Having said that there is no other explanation as to why it did not work. The conditions that were judged and tested to be most effective in resolving of this issue are then chosen for the next attempt. Without attempting to try and understand the issue with the underlying technology the process is moved from one attempt to another. Solving an issue through a non-standard or systematic process is not regarded as experimentation or analysis within the structure of a systematic search.
Fine tuning involves minor adjustments and comes after the basic SR&ED work has been completed. Works like fine tuning, debugging, trouble-shooting are not regarded as SR&ED as there is no need to resolve uncertainties of technology.
Product in SR&ED Claims has a commercial meaning in correlation with the custom product which is designed to meet customer requirements or market driven technical specifications. Hence, SR&ED is regarded as a commercial project.
Application of SR&ED claims is associated with normal practice:
Experimental development work and development work depending upon standard practice in the respective fields of technology and engineering are different. Standard practice is based on the application of routine approaches and procedures which can be accessed by skilled professionals in their respective fields. Development work however, is about the routine practice that adapts a known working technological and engineering practice which achieves the required objective. Under such circumstances there no chances of any technological uncertainty. Hence development by routine practice is not regarded as SR&ED. Any departure from it does not mean the work is SR&ED and it must meet the definition of SR&ED in the ITA. So it is very likely even if the work is of technological nature it may not be SR&ED claims.
In most cases projects of migration is also regarded as standard practice.
6-Routine Maintenance and Trouble-shooting
It involves in fixing and correction of equipment, any software or any process that involves identification of a technical problem.
Trouble-shooting consists of:
- Resolving software problems
- Optimizing a process – both technically and economically
- Adjusting equipment performance
- Evaluating breakdowns
- Improving working conditions
- Minimizing production losses
- Controlling the generation and/or disposal of waste
Other words which commonly being used by CRA can be also triggering the SR&ED claim review if they have been excessively used in the project descriptions such as:
11-Unquantifiable words such as Maximizing, Minimizing, Optimizing, etc.
If you have any further questions about eligibility and your specific situation, feel free to contact Kelid for helpful advice. If you have a question that you feel can help other people in similar situations, leave a comment below.