How to organize your SR & ED documentation?

There is still a popular belief in the collective imagination that verbal testimony is sufficient to convince the RTA that our projects are SR & ED. No more. We are very far from that. Everything changed. It is no longer the same program.

How do you meet the new CRA requirements? Simply put : organize a better documentation system. Document throughout the year. Establish a light system for use by your staff but at the same time a precise and disciplined mechanism. There is no choice. The new requests from the CRA are there, in black and white. Let’s look at how to better organize to document your SR&ED.

A story from the good ol’ time …

I have been preparing SR & ED claims for over twenty years. Ah, back in time! The grass was softer and greener! I remember it as if it were yesterday … Let me tell you how much everything has changed.

At the turn of the century, the CRA managed SR & ED as an incentive program to take technological risks. The CRA accepted “even minor” advances and projects were defined and judged at the highest possible level to bring out the overall issues. Project descriptions had no word or page limit. Project documentation was often produced in the normal course of the commercial project with few references to the SR & ED project. When auditing the documentation, it was first supported by verbal testimony from the resources involved in the project. Some documentation demonstrating that development had actually taken place was enough to reassure the RTA. Requests for detailed information related mainly to the accounting aspects: evidence of payment of invoices and salaries.

Today’s approach is one of compliance control. We are suspected of fraud until proven guilty. We have to prove that we deserve the credit. A project description is limited to 1,500 words. Major projects must be broken into small SR & ED chips. The CRA wants proofs that you have identified your eligible projects throughout the year and that you manage and document them as separate SR & ED projects from your other development projects. You should note and date your technological goals, your uncertainties, your assumptions, your tests, your conclusions for each hypothesis. In short, you almost have to demonstrate that you have a laboratory in your plant. There must be a highly structured and documented experimental process. Verbal testimony is no longer sufficient for audit if it is not corroborated by tangible written evidence.

Documenting what

There is no definitive list of sufficient evidence, a complete guide to whatever it is possible or necessary to document to demonstrate the eligibility of our work. The T4088 Guide indicates that “contemporaneous documentation that is dated, signed, and specific to the work performed are the best supporting evidence that you can provide. ”

We have already discussed the reasons why the CRA doesn’t define more precisely the necessary and sufficient documentation to satisfy the CRA’s RTAs. Let’s look at what can be done simply to document the past.

Your Advisor

What is your relationship with the CRA and your RTA? It is very important to maintain a positive relationship with your technical representative. He will judge your case. Everyone has their little preferences in terms of documentation. A phone call or even a visit can be very informative. Is the advisor of the last technical audit always in charge of your file? You are the taxpayer, you have a right to know that. What are his personal requirements in terms of documentation? Would he like more texts? Does he prefer pictures? tables ? A paper or electronic documentation? He’s your advisor. Build your relationship with him because it’s his opinion that counts.

Your inventory

What do you have in place now? Make an inventory of the documents available for your projects and compare this with the incomplete list of CRA requirements (T4088 Appendix 2). Most development teams use a project tracking system. This is a good start. There are some interesting information.

You probably have emails and SMS messages. Especially those from the main technical experts of your development projects. Gather, date and securely store all e-mails, reports, analyzes, web searches, test results and internal discussions relevant to your project and work. You make drawings on the whiteboard? Take a dated photo. Do you have a functional prototype? Capture it in video. All of these sources contain relevant information to build your documentation.

Develop a project log by compiling in one place the relevant information and the path followed by your team. You will get a “collage” easy to consult and sift later. Your documents do not need to be long or well formatted. They must be relevant and dated.

Your computerized project accounting systems, timesheets and the like are credible sources for the CRA. The same applies to contracts with your subcontractors and customers for whom the projects were carried out. These are all sources of demonstration for your claim : how much and when your activities we performed.

Don’t wait

From the start of the project, bring together everything that can be used to testify directly or indirectly to the relevant facts . And it is necessary to identify relevant information early and keep track of it or a copy, since information tends to get lost in the masses of data produced daily.

We are always at risk of losing an important development resource during a movement of personnel, so we must insist that everyone contributes to build his traces, evidences and other artifacts DURING THE PROJECT. That is part of their job. The financing of the development project is the responsibility of all the main contributors.

Conclusion

In conclusion, documenting a SR & ED project is everyone’s business and it is important throughout the project. Do not wait until you have to defend this project in front of the CRA. You will then have to live with the strengths and weaknesses of the available information. That day you will feel a huge void when you see the little evidence you have to convince the RTA. And compassion? … Good luck, this is not a reliable strategy.

And you what do you think ? How do you document your SR & ED projects? Do you have any trick? Ways of doing things or ideas to share? How has the CRA responded to your documentation mechanisms?

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