Claim Review Manual for Research and Technology Advisors

SR&ED Program

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Chapter 1.0 Introduction

Table of contents

• 1.1.0 List of acronyms
• 1.2.0 Purpose and scope of the Claim Review Manual (CRM)
  • 1.2.1 Training courses for RTAs
• 1.3.0 Authority of the CRM
• 1.4.0 Terminology concerning requirements
• 1.5.0 Due process / Taxpayer Bill of Rights
• 1.6.0 Minimum review requirements for RTAs
• 1.7.0 Reference to the definition of SR&ED in the Income Tax Act
• 1.8.0 Revisions of the CRM

1.1.0 List of acronyms

1.2.0 Purpose and scope of the Claim Review Manual (CRM)

The CRM provides a comprehensive set of procedures for the Canada Revenue Agency's (CRA) research and technology advisors (RTAs) to perform the technical review of scientific research and experimental development (SR&ED) claims. The CRM serves as a complete guide for the RTA in planning, coordinating (with financial reviewers), conducting and documenting the review of claims. Review procedures for FRs are described in the Financial Claim Review Manual (FCRM).  The procedures in the CRM will help enhance consistency and quality in the review of claims among RTAs nationally. Consistency in this context is defined as follows: in similar circumstances, the RTA will follow the same or similar procedures to uncover the same facts on which to base a decision.

In addition, the CRM provides part of the basis for a quality assurance (QA) program that will ensure the proper application of the SR&ED legislation, policies and procedures, thereby contributing to maintain the fiscal integrity of the SR&ED program.

By providing the means for consistent and fair treatment of SR&ED claims nationally, the CRM will help ensure that claimants receive their full entitlement allowed under the Income Tax Act. To improve the level of service to claimants, these procedures emphasize working with, informing and educating claimants on the many aspects of the SR&ED program. For example, within each chapter of the CRM, some highlighted boxes draw attention to numerous proven approaches for working effectively with claimants at each stage of the review process, which is especially important for first-time claimants (FTC). In addition, the CRM incorporates, where required, procedures for resolving claimants' SR&ED concerns. These procedures help resolve disputes early in the review process and at the lowest level possible. All of these suggested approaches to help improve claimants' compliance are based on best practices employed in various coordinating tax services offices (CTSOs). By working with claimants and objectively reviewing their claims, the CRA will be able to deliver SR&ED tax incentives sooner.

The procedures in the CRM begin when the RTA is assigned the SR&ED claim and end with the completion of the TF98 file. The CRM briefly discusses the control function (CF) and coding for files in the Audit Information Management System (AIMS), but does not cover detailed procedures for these subjects. The CRM also does not cover procedures for pre-claim project reviews (PCPRs), process reviews, account executive (AE) services, the first-time claimant advisory service (FTCAS), the random review program (RRP) or the financial review.  Procedures for these topics are described in the relevant publications or the directives, accessible on the CRA Infozone.

The CRM does not provide comprehensive information on general CRA policy or non-CRA legislation such as those concerning security, confidentiality, health and safety. As a matter of convenience, the CRM provides some summaries of and links to important policies.

However, it is the responsibility of the RTA to know and follow all the current applicable policy and legislation with respect to these matters.

The CRM discusses procedures concerning some review issues, but it is not intended to discuss the definition of SR&ED or provide training on determining the eligibility of work.  

SR&ED is defined in the Act and explained in Eligibility of work for SR&ED Investment Tax Credits Policy (eligibility policy).  There are two other publications that relate to the eligibility of work: SR&ED while Developing an Asset Policy (asset policy),and SR&ED During Production Runs Policy (production runs policy) .

A general reference guide for SR&ED employees is available at the SR&ED Reference Guide. This contains additional useful information for SR&ED employees, not just about the SR&ED Program.

1.2.1 Training courses for RTAs

There are currently a number of courses for RTAs that deal with subjects not covered in the CRM.

Course TD 1170-000 is a basic training course for RTAs.

Course HQ1188-000 "Eligibility of work for SR&ED" is a three day course covering the eligibility policy with case studies on this topic.

The following are one-day courses dealing with specific aspects of the review process;

• HQ1180-000 – SR&ED review report writing
• HQ1181-000 – Documentation and supporting evidence
• HQ1182-000 – Risk-based review process
• HQ1183-000 – Business context (BC) in the review process

The RTA’s manager will determine the appropriate time to take these courses. For more information on these courses, contact your manager.

1.3.0 Authority of the CRM

The CRM identifies the procedures that RTAs follow when reviewing SR&ED claims. Chapter 1.6.0 outlines the minimum (high level) requirements for all reviews. The other chapters outline how these minimum requirements generally apply to the procedures described in each chapter. The RTA is responsible for deciding what procedures to apply, or how to apply them in a particular situation, in order to meet these minimum requirements.

1.4.0 Terminology concerning requirements

While the CRM does not generally identify a specific procedure as being necessary to meet one of the minimum review requirements, certain terms may be used to provide guidance to the RTA. The CRM uses certain terms to describe three levels of latitude or discretion:

1.5.0 Due process / Taxpayer Bill of Rights

Due process is a fundamental requirement in the review of claims and means that the review is fair and impartial. While not specifically mentioned, the characteristics of due process follow from the CRA's Taxpayer Bill of Rights. This subject is mentioned in many other places in the CRM. The requirements described in this chapter apply generally during all aspects of the review, particularly during "Conducting the Review" described in Chapter 5. Failure to give the claimant due process could result in the review process not being supportable, and thus the claimant could successfully challenge the CRA’s decisions at the notice of objection (NOO) stage (discussed in Chapter 2.6.0). Refer to the following link for more information on the Taxpayer Bill of Rights.

A claimant can still be given due process even if some steps or procedures in the CRM are not followed or are followed in a different order than presented. For example, if the RTA did not review certain documents during the on-site visit, the review of them at the proposal stage would correct that situation. Therefore, it is the treatment of the claimant as a whole, during the entire review process, which determines whether due process is given. Mostly, due process means treating the claimant with courtesy, respect, and fairness while applying the legislation and CRA policies correctly. If the RTA does all of the activities noted in this chapter, it will ensure that due process is given.

Eight characteristics of due process, and the particular taxpayer rights that they derive from, are as follows:

1. provide service in the official language of choice; (Taxpayer right #2)
2. explain the review process, issues and the planned approach to resolve them to the claimant; (Taxpayer rights #5,6,10)
3. communicate the options available to the claimant if they do not agree with CRA; (Taxpayer rights #4,9)
4. give the claimant information on the CRA requirements and explain what information the CRA needs to satisfy them; (Taxpayer rights #6)
5. give claimants the opportunity to present their position, ask questions, express their concerns and to provide further information with respect to their claim; (Taxpayer rights #1,5,15)
6. consider additional information provided in support of the claimant's position before coming to a decision; (Taxpayer rights #1, 5, 15).
7. explain decisions and the rationale to the claimant; (Taxpayer rights #5,6,9,11) and
8. make decisions that are fair and impartial and respect current legislation and policy. (Taxpayer rights #1,8)

Details of the above steps are discussed in the appropriate places in the CRM. As will be noted, the specific details of what needs to be done depend on the particulars of each case and what the claimant already knows about the SR&ED program.

1.6.0 Minimum review requirements for RTAs

This chapter outlines the minimum requirements for any review of an SR&ED claim. These headings do not correspond to individual chapters in the CRM. Many of these requirements apply generally or in more than one aspect of the review. The requirements, as they apply in each part of the review, will be described in more detail in each chapter of the CRM.

List of requirements

1. General requirements:

Follow all CRA approved procedures concerning:

• communication of information to the claimant or their authorized representative;
• safety and security;
• information security;
• service in the official languages; and

• matters outside the scope of the CRM.

2. Documentation requirements:

• document all relevant review work (working papers), as well as keep other relevant supporting documentation related to the claimed work;
• do not document irrelevant personal opinions or irrelevant information about other claimants;
• prepare an SR&ED review report using the described format, or other working papers that explain the decisions and the rationale; and
• keep and organize working papers and supporting documentation in the TF98 file.

3. Requirements on consulting the research and technology manager (RTM):

• if there are contentious or problem situations;
• if there are questions about the application of policies;
• if referrals or outside consultation is needed;
• for approval of the review plan;
• for approval of important modifications to the review plan;
• if it is recommended that a claim will be disallowed for lack of information;
• if unfavourable decisions will be made without an on-site visit;
• if penalties may apply;
• if fraud is suspected;
• if formal better books and records letters are needed;
• for approval of the SR&ED review report; and
• if waivers may need to be used.

4. Requirements on coordinating the review:

• coordinate the technical review with the FR assigned to the claim.

5. Requirements on planning the review:

Prepare a written review plan, which includes the:

• scope of the review;
• major issues / concerns, and
• methodology or information required to resolve the issues / concerns.

6. Requirements on conducting the review:

• explain to the claimant the review process, issues and the planned approach to resolve them;
• communicate the options available to the claimant for resolving any of the issue;
• give the claimant information on the CRA requirements, including documentation requirements, and explain what information the CRA needs to satisfy them;
• give claimants the opportunity to present their position, ask questions, express their concerns and to provide further information with respect to their position;
• consider additional information provided in support of the claimant’s position before coming to a decision;
• make decisions that are fair and impartial and respect current legislation and policy;
• document key activities and observations concerning the claim, supporting information and the identified claim issues;
• for claimants who have previously received the FTCAS, determine if the recommendations of the FTCAS report have been addressed;
• document communications and meetings with the claimant, managers, co-workers and others that are relevant to the eligibility determinations and other decisions;
• obtain any documentation from the claimant necessary to support the eligibility determinations and other decisions; and
• do not negotiate eligibility or expenditures.

7. Requirements on finalizing the review:

• assist the FR in preparing the contents of the proposal letter package by providing any needed explanation of the proposed changes with respect to eligibility and any other technical issues;
• explain the proposed decisions with respect to eligibility or other technical issues to the claimant; and
• respond to any claimant’s concerns, rebuttal or additional information relating to the RTA's decisions, as reflected in the proposal package.

1.7.0 Reference to the definition of SR&ED in the Income Tax Act

For the purposes of the CRM, where the context is clear, references to subsection 248(1) or paragraphs of subsection 248(1) of the Act, without any other qualifier, mean references to the definition of SR&ED in subsection 248(1) of the Act, or paragraphs of that definition.

1.8.0 Revisions of the CRM

The CRM will be updated and revised to ensure that it remains current. Feedback and suggestions from anyone who sees opportunities to improve the CRM is encouraged. Comments can be forwarded to SR&ED CRM .

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