Writing your SR & DE descriptions: 4 common mistakes

Claiming a SR & ED project cannot be botched up. Let’s look at some common mistakes of descriptions positioning. In future articles we will see how to write a SR & ED project description.

Having the right documents

If you present your products or services to prospective clients, you prepare your best arguments and adapt them to their needs. You bring your promotional flyers, not your financial statements or invoices. It is very important to make new sales.

Financing your R & D projects is just as important for a forefront, innovative company like yours. It is often essential to the pursuit of your development activities. For many SR & ED credits are the difference between a profitable year or not. Is this the case for your business?

Each professional service has its own requirements for supporting documents:

• The contractor requires plans and permits to build your house.
• The accountant wants contracts and invoices to prepare your financial statements.
• The pharmacist requires a doctor’s prescription before you deliver medicine.

So why so many businesses attempt to finance their technology with the CRA by presenting sales documents? Would you leave the country without your passport?

The right angle for your report

Over the last twenty years we read thousands of technical descriptions to claim SR & ED tax credits. Many of these descriptions did not meet CRA requirements. Why, in 2016, do we still see product and not technology descriptions ?

Like all claimants, I think there are too many audits by the CRA. But in reality, it seems that the CRA still has a lot to do. Too many claimants have not yet had their lesson!

The SR & ED project description in the T661 will be read by a technology expert (IT, telecom, mechanical, chemical, etc.). It must meet certain standards. Even if your past claims have been accepted, do not take this report lightly. It is often the last safety net that can prevent an audit.

The most common errors:

This is not a sales or marketing report. This is not just a technical report. This is not a bunch of technical buzzwords. Let’s look at some of the most common errors encountered:

1- Marketing Description

Too often the descriptions are more like a salesman’s car sheet : It emphasizes the characteristics of the product, its qualities and the feelings it inspires:

• This is the perfect car,

  

• It is beautiful and yellow,
• It goes fast (0-100km / h in 6 seconds …)
• It’s smooth driving is remarkable,
• Its leather seats are comfortable,
• It is equipped with diode headlights,

Transposed into a T661 it looks like this:

• We have developed a unique technology on the market,
• It allows you to trace a product in the database in 0.5 seconds
• With an error rate of less than .01%,
• We used MySQL XYZ because it contains a function that will be useful in our delivery,
• We have selected the ABC language for producing dynamic web pages.

Do you recognize some of your SR & ED project descriptions?

What is wrong here? It merely describes the characteristics of the solution. It’s like describing the beautiful yellow car. This is NOT what the Research and Technology Advisors (RTA) is looking for. He wants to know why this is R & D according to you. So you have to be technical about it. Open the hood and show what you have done !

2- Technical or product specification

Other writers understand the need to be technical. They prepare a sort of technical specifications of the product to be delivered.

“We want to deliver a technology that:

• Will be two times faster than the existing version,
• Will include an integrated database editor,
• Complies with the XXX user interface standard, etc.

What is wrong here? It merely describes what the technology will deliver, without specifying the anticipated or encountered challenges or uncertainties. The RTA wants to know where the R & D is according to you.

3- Business Project:

Several descriptions show the efforts of a company to improve its business, for example, to develop new products or new product line, to modify or upgrade equipment, processes or facilities, or to start engineering projects.

On the T661, this may look like this:

• We are the only (or first) to offer these features that speed and add to the accuracy of scanning through over 10 million records database…
• This will give us a unique competitive advantage in the market

What is wrong here? It describes the business project, or the commercial development, but without identifying where experimental development is happening. The RTA is looking for engineering challenges, technology constraints that make the development uncertain and difficult.

4 R & D or SR & ED?

Some writers describe very well the activities of research and development. For example, to expand the range of products, we need :

• To increase the cache size,
• To optimize and speed up the processing by doubling it so that we reduce the response time by 40%.

This is a technical description of your R & D project that suggests problems and uncertainties. But the RTA wants more than that. He wants clarification on the limits of the existing technologies to see where you tried to exceed those limits. He wants you to express what new knowledge you have learned or searched for during your systematic experimental process. Only then he will recognize the probable existence of a SR & ED process.

You must demonstrate that you understand the difference between R&D and SR&ED and that you have distinguished the SR & ED portion in your project from to your more common ones (R & D). If your systematic SR & ED process is documented properly, then the RTA will accept activities that are part of this SR & ED project if they are commensurate with the needs and they directly support the attempt to achieve technology progress.

We have illustrated four very common positioning errors. It is important to understand why they are inadequate before rewriting these projects.

In future articles we will move on to actually writing SR & ED descriptions. We will give you tips and techniques to boost your texts to satisfy the new CRA requirements.

And you, what does this demonstration inspire you ? Have you seen or encountered these situations? How did you overcome them?