On April 6, 2022, the Canada Revenue Agency issued a press release noting a recent increase in SR&ED (Scientific Research and Experimental Development) claims containing false or fraudulent information. The rarity of such public warnings from the conservative CRA suggests a systematic pattern of problematic claims.
The Self-Assessment System
Canada's tax system operates on a "self-assessment" basis with over 200 specialized auditors (Research and Technology Advisors and Financial Reviewers) dedicated to reviewing SR&ED claims for both scientific validity and financial accuracy.
Fraudulent Claims Pattern
Some unscrupulous SR&ED consulting firms employ aggressive sales tactics targeting small businesses with promises of "free money" from the government. Examples of questionable claims include:
- Bakeries claiming SR&ED for new recipes and products
- Auto-body shops claiming SR&ED for vehicle repair and reconstruction
- Paint shops claiming SR&ED for quality issues in print jobs
These fraudulent claims typically involve overstating eligible expenditures, claiming clearly ineligible work, or lacking proper documentation.
Consequences
The CRA explicitly warned that submitting false information results in repayment obligations plus "serious consequences, including interest and penalties." The agency also noted that third parties knowingly filing false claims face civil penalties.
Responsible Filing
Taxpayers bear responsibility for verifying submitted information and maintaining supporting documentation. At ENTAX, we have never had a client assessed fines because we prioritize ethical, well-documented, and reasonable filings — sometimes telling clients information they don't want to hear.