If you file SR&ED claims, you're likely aware that audits have become routine. Over time, defending claims has shifted from consuming 15% of billable hours to 40%, making audit-ready documentation essential.
How Soon Should I Reply to CRA?
Respond immediately upon receiving a Request for Information (RFI) letter. Call the CRA to acknowledge receipt, estimate your timeline, and identify deliverables. If their standard 30-day window conflicts with business priorities, request a two-week extension — auditors typically accommodate such requests.
How Do I Know What They Are Auditing?
Review the RFI letter carefully to determine whether the audit covers financial matters, technical aspects, or both. Identify any specific concerns hinted at in the letter. If multiple projects are filed, the review usually focuses on selected ones. While many letters follow standard templates, technical auditors often address domain-specific issues. Remember that auditors rarely know why your case was selected — CRA's automated screening assigned it to them.
How Do I Handle the SR&ED Audit in My Company?
Designate a project manager to lead the audit response like any other company initiative. Map out deliverables, scope, timeline, and budget. Depending on claim value and internal resources, consider engaging external consultants. Treating the audit as a managed project yields the best outcomes.
How Do I Ensure Success in a SR&ED Audit?
Present your case logically and concisely by addressing each request directly. Organize responses using indexed binders or clearly referenced digital folders. Since auditors typically review multiple cases simultaneously, making their job easier — helping them help you — improves your prospects.
What Is the Best Way to Present My SR&ED Work to the CRA?
Technical specs and design documents alone won't suffice. Avoid overwhelming CRA with excessive documentation. SR&ED focuses on the "how," not the "what." Emphasize evidence highlighting technological uncertainty and experimental work — not final product specifications or marketing materials. Present your strongest evidence, correlating it directly to the uncertainties and work described in your original claim.
How Can I Prepare for the Actual SR&ED Audit Meeting?
Ensure anyone directly involved in the project attends the on-site review. All participants should understand what constitutes SR&ED work and genuinely believe their project qualifies. Organize documentation thoroughly so you can efficiently communicate and demonstrate your position.
Find Your Star Witnesses: Success depends on effective communication. Select team members who articulate your position most persuasively. Hands-on project leads often communicate technical details better than executives. CTOs focused on business strategy may be less effective than R&D leads.
Know Your Auditor: Research your auditor's background and style. Do they prefer visual explanations or technical detail? Tailor your presentation accordingly. A preliminary call to CRA might reveal areas deserving emphasis. Maintain a professional, banker-like relationship.
What Happens If the CRA Doesn't Understand My SR&ED Work?
If an auditor assumes the work is routine engineering, ask them to justify that position. Keep all documentation readily accessible. Don't assume previous positive audits predict future outcomes. Each claim stands independently, with auditors applying their own interpretations of SR&ED policy.
Audits offer valuable opportunities to refine processes and strengthen documentation. Don't assume near-term safety from review, as CRA can audit repeatedly. If given formal guidance for improvement, comply in future submissions to avoid claim denials.
For deeper understanding, consult the CRA's Claim Review Manual, which outlines the review process the CRA should follow.