How to write SR&ED description : the beginning

You must fill a T661 form to write SR&ED descriptions. The CRA provides many information to facilitate the preparation of claim files and prepare this form:

• The T4088 guide explains how to complete this form line by line.
• The “Eligibility of Work for SR&ED Investment Tax Credits Policy” proposes a methodology to determine if there is SR & ED and how to identify what work constitutes SR & ED.
• Several other documents are also available on the CRA website.

1- Too much detail kills clarity

Despite the desire of the Agency, the more you read these documents and the more you are confused. Why the confusion? We see two main reasons:

• These are all very academic papers. They are intended for scientists from the ARC and expert consultants who prepare these files on a full-time basis. These documents have a legal side, they have several important definitions, provide subtle detail, but they stick to formally describe what is expected, the WHAT.
• The typical taxpayer’s feet are grounded in reality. He has a scientific base, is an engineer, a technician or a computer expert. But the reality of companies remains the same: a team of production and development which has to satisfy constraints from delivery, technology and business. The writer needs a guide, to be provided with a recipe explaining HOW to produce the text.

The CRA requirements have evolved toward more science and documented systematic experimentation. The enterprise development constraints require it to optimize processes, limiting the scope of the analysis and documentation as soon as a solution is found. The gap keeps growing between requirements and reality.

That’s why we wrote this practical guide to drafting the technical description of the T661 form.

2- The importance of the technical description

The T661 form is prescribed, that is to say, it is absolutely necessary to claim the SR & ED credit. The number of words used in lines lines 242, 244 and 246 can not exceed 350, 700 and 350 respectively. You must be centered on the technical facts and formulate your answer in a technical language and style.

These texts will be read by those research and technology advisors (RTAs) as part of the preliminary assessment of the risk associated with your file. If the risk is deemed sufficient, your claim will be selected for a request for additional information and, in most cases, for an audit meeting.

We cannot avoid an occasional audit, but a good description can certainly create a good impression with the RTA and thereby minimize negative impacts. It is a very important document that can trigger or avoid such an audit.

3- Project positioning

In a previous article, we identified four common positioning mistakes that we find in the SR & ED projects descriptions. Here is how to maximize your chances of being accepted by positionning your project properly.

3.1 This is a sale

Our texts usually sell the benefits of our technology to potential customers. You can see the SR&ED project description as a different kind of sale. Let’s see some important differences:

– Instead of selling the benefits (outcomes) of our technology, we will sell our experimental process, the fact that we followed the scientific method. The results (success or failure of our products) are of little importance.

– Our target audience is made up of some RTA and their managers at CRA, instead of selling to potential customers.

– The success of our sale will be measured by accepted projects and tax credits earned and not in new sales.

3.2 Selling an experimental process

Take the analogy of the automobile. To sell a car, the seller insists on the characteristics of the product, its features and the feelings it inspires:

• It is beautiful and red,
• It goes fast,
• Its leather seats are comfortable.

What must be present in our SR & ED description are not the characteristics of the car, but rather what you changed in that car. We must

• lift the hood and explain your technological goals and the limits of the technologies in place in relation to the objective.
• explain that in order to achieve our goal, you need to overcome the limits of the existing technology (and not simply replace it).
• illustrate the systematic process followed and each of the identified assumptions during the experiment.

4- How to write: general comments

Let’s start with some general comments on how to write a technical description of the project.

• Detail your content. Start by putting all the details of the project on paper. You will see all of your processes and this will facilitate your description and the reader’s job.
• Cut the SR & ED project. Once the details are established, strategically edit the content description to tighten around the most relevant SR & ED aspects of the project. Eliminate the useless details as they confuse your argument.
• Focus on the key steps and difficult or uncertain activities in order to include quantifiable measures, statistics, findings and other evidences.
• Logical and concise communication. The progression of ideas must gently arise between sections, allowing the reader to go through the document quickly without searching for other information.
• Technical language. Write in the technical language and style of those who do the actual work or who understand and are familiar with the work.
• No useless “buzzwords”. Restrict using jargon, buzzwords or other technical sounding phrases or abbreviations. The RTAs see them all the time. Technical details must be specific and restricted to those needed to ease the document. Avoid to take the reader in too much detail, as this can lead to misconceptions about the work done and the advancements sought.
• Systematic investigation. The explanation should focus on the technical facts illustrating the experimental or analytical work. You have to show an experiment or a systematic search by means of analysis. It must also show that the purpose of the work was to achieve progress in a field of science or technology.
• Keep details. Given the space limitations for writing, it is smart to prepare in parallel a documentation (a binder or a working document), containing more detailed explanations, and ready to show at a possible audit.
• Continuity between projects. Projects rarely end by fiscal year-end.

1. For projects that are still active, present them in the same sequence as the previous year. This simplifies the references for the RTA. Remember, the goal is that they read it as quickly as possible, reducing the time spent on your file and the likelihood of other issues.
2. For completed projects, clearly establish why the projects from previous years were not continued or claimed in the current year.

• Keep things simple. It is not necessary to separately itemize all the small projects. We can combine projects, provided they have similar technologies (eg in different fields of application).
• Technological titles, not the customers name. Technology projects have different titles for business projects. The same technology is sometimes used in different customer projects. In this case, an integration concept as technology axis can be understood by the CRA. We will come back to this in a future article.
• No R & D project is “eternal”. Pay attention to projects that last more than three years. The CRA seeks to cut projects they believe endless. Reassess current projects to see if a new technology could help to present a new angle. If not, stop claiming the project and go on under a new name more appropriate to the new objectives and uncertainties.
• Support activities. Project descriptions are short. Avoid detailing support activities. Their effect is to focus as lenses on different aspects of the project. You risk giving the reader the impression that your claim is mostly made up of support activities and therefore there is surplus to cut out.
• External Reviewer. If your description is reviewed by someone not familiar with the material, it is always a good idea. This will highlight gaps in the reasoning and explanations. Sometimes the creator of the technology is too close to the material and some of the steps are neglected or links between the steps are not well explained.
• Get involved. Spend the time and effort needed to prepare these documents. Help the CRA to say “yes” to your R & D. It’s worth it.

So these were our general comments on writing your SR & ED project descriptions. In future articles, we will explain in more details how to write the sections 242,244 and 246 of the T661.

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