Financial Claim Review Manual – Review procedures for financial reviewers
Chapter 1.0 Introduction
Table of contents
- 1.1 Summary of chapter
- 1.2 Purpose and scope of the Claim Review Manual
- 1.3 Authority of the CRM
- 1.4 Design and revisions of the CRM
- 1.5 Release of the CRM
- 1.6 Background information
- 1.7 Minimum Review Requirements for the FR
- 1.8 Appendices
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1.1 Summary of chapter
This chapter provides general information and covers the following sections:
1.2 Purpose and scope of the Claim Review Manual
1.3 Authority of the Claim Review Manual (CRM)
1.4 Design and revisions of the CRM
1.5 Release of the CRM
1.6 Background information (mandate, CRA values, Taxpayer Bill of Rights and Due Process and Transparency)
1.7 Minimum review requirements for the Financial Reviewer (FR)
1.2 Purpose and scope of the Claim Review Manual
The Scientific Research and Experimental Development (SR&ED) Claim Review Manual (CRM) is made up of two parts, one that is primarily written for research and technology advisors (RTAs), and this part which is focused on procedures for financial reviewers (FRs). The financial CRM provides a comprehensive set of procedures for the Canada Revenue Agency’s (CRA’s) FRs to perform the financial review of SR&ED claims. The CRM serves as a guide for the FR in planning, coordinating with the RTA, conducting and documenting the review of claims. The appendices of the CRM include the list of acronyms and initialisms and a glossary of terms used throughout the CRM. These procedures will help enhance consistency and quality in the review of claims among FRs nationally. Consistency in this context is defined as follows:
"In similar circumstances, the FR will follow the same or similar procedures to uncover the same facts on which to base a decision.”
In addition, the CRM will provide part of the basis for a quality assurance 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.
The guidance provided in this document is intended to ensure that reviews are conducted as efficiently and effectively as possible without compromising the CRA values of integrity, professionalism, respect, and co-operation and, while adhering to CRA security and other policies, providing due process to the claimant, and protecting the confidentiality of claimant information.
By providing the means for consistent and fair treatment of claims nationally, the CRM will help ensure that claimants receive their full entitlement 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. In addition, the CRM incorporates, where required, procedures for resolving claimants’ 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). The FR will be able to deliver the SR&ED program in a timely manner by working with the claimants and objectively reviewing the claims.
Although the CRM is primarily a procedural guide for the FR, information presented here can also be valuable for assistant directors (ADs), financial review managers (FRMs), research and technology advisors (RTAs), financial technical advisors (FTA), research and technology managers (RTMs), research and technology officers (RTOs) and others who are involved in the claims.
The procedures discussed in the CRM begin when the file is assigned to the FR for review by the control function, and end when the processing instructions and documents are finalized and the results of the review are recorded in the Audit Information Management System (AIMS).
The control function procedures are not covered in these chapters. Also, the CRM does not include procedures for Pre-Claim Project Reviews, Process Reviews, or Account Executive Services. Please refer to the relevant SR&ED directives and guidelines for information pertaining to these subjects.
The CRM is focused almost exclusively on the financial review aspects of dealing with the SR&ED claims of corporations. Additional considerations for large files are included at or near the end of chapters 4, 5 and 6 to outline the particularities of processing such files, and the procedures for processing partnership claims for SR&ED are included in an appendix. There may be other particularities to take into consideration in processing SR&ED claims from other types of entities such as, individuals, limited partnerships, trusts, joint ventures, and cooperatives, which are not covered in the CRM.
The CRM does not provide comprehensive information on general CRA policy such as those concerning security, confidentiality, and health and safety. As a matter of convenience, the CRM does provide some summaries of, and links to, important policies. When needed, these policies should be consulted for the latest comprehensive information concerning the issue. The summaries are provided as overviews and may not reflect the most recent changes made to the policies or underlying legislation.
Before using the CRM, and indeed before commencing the review of a claim, the FR needs to be broadly familiar with the relevant legislation, aware of CRA policies and procedures, and proficient at accessing and using CRA systems. This knowledge is usually obtained through various courses and training provided by the CRA (including course HQ1196-000, Scientific Research and Experimental Development) and supplemented by additional research and reading undertaken on-the-job. Although little of this information is replicated in the CRM, the following chapters will provide references for the less-experienced FR of where to find some of this basic information. These references to relevant Web sites are provided to facilitate access to these essential guidance documents and to the concepts that link them into a cohesive plan for program delivery. Suggested learning paths can be found at:
Training and Learning (Scientific Research and Experimental Development Program (SR&ED) Topic)
1.3 Authority of the CRM
The CRM identifies the procedures that the FR follows when reviewing claims. Chapter 1.6 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 FR 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 Design and revisions of the CRM
The CRM is designed to be an evergreen reference for the FR, meaning that the document itself will be kept current through regular updates and revisions. Feedback and suggestions from FRs who see opportunities to improve the CRM are encouraged. Comments can be forwarded to a dedicated email account: SR&ED CRM.
The CRM will be available in the internal shared drive. It will be accessible to ADs, FRMs, FTAs and FRs. Therefore, the FR should consult the CRM regularly to ensure that the latest version is being used.
Many of the topics within the CRM provide direct links to other primary CRA reference documents. This will facilitate topical searches of information in related documents. This also ensures that the FR will be accessing the most current documents and reference materials posted on the intranet for the particular linked topic. The CRM also provides the FR with useful generic checklists, working papers relevant to the issue at hand, and correspondence templates. On account of its design, others involved in the SR&ED Program such as FRMs, RTAs, and FTAs, may also find the CRM user-friendly for research and accessing other CRA documents.
1.5 Release of the CRM
The CRM is an internal CRA document that contains some information that must not be shared, transmitted or communicated, in whole or in part, to non-CRA personnel. A severed version of the CRM will be posted and placed on CRA’s public SR&ED Web site to assist claimants in understanding the review process. The CRM will become effective as of April 30, 2012. For reviews in progress as of that date, the FR should begin following the appropriate procedures in the CRM that correspond to the stage of the review at that point in time. The FR is not expected to complete the procedures in the CRM related to the review steps that were performed earlier.
1.6 Background information
The following overview topics briefly touch upon some basic concepts an FR must be aware of before undertaking a review. The concepts may be referred to in other chapters of the CRM, but they will not be explained in depth in those chapters. However, in many cases, links to the relevant directive or policy statement are provided in this chapter.
Once the FR has obtained a clear understanding of the underlying concepts and policies and is ready to apply them in a review setting, they will possess all of the tools needed to undertake claim reviews.
1.6.1 Mandate of the SR&ED Program
The SR&ED Program is administered at the CRA in Headquarters, the regional offices, and the tax services offices (TSOs), each area having its own specific functions. The objective of the SR&ED Program is to deliver SR&ED tax incentives in a timely, consistent, and predictable manner, while encouraging businesses to prepare their claims in compliance with tax laws, policies and procedures. The Program commitments are two-fold:
- Ensure that businesses are aware of the Program and can access it as easily as possible. It is important for businesses to receive their entitlements under the Program, to maximize the investment benefits of SR&ED incentives, and to minimize the costs of compliance and administration.
- Administer the Program with fiscal integrity. The CRA will apply the SR&ED legislation correctly, consistently and fairly, and will ensure that claimants receive the full credit to which they are entitled.
1.6.2 CRA values – Our guiding principles
Integrity is the foundation of our administration. It means treating people fairly and applying the law fairly.
Professionalism is the key to success in achieving our mission. It means being committed to the highest standards of achievement.
Respect is the basis for our dealings with employees, colleagues, and clients. It means being sensitive and responsive to the rights of individuals.
Co-operation is the foundation for meeting the challenges of the future. It means building partnerships and working together toward common goals.
All CRA employees are expected to manifest these core values while conducting any CRA business.
1.6.3 The taxpayer Bill of Rights and due process
The Taxpayer Bill of Rights (Bill) is a document that itemizes fifteen taxpayer rights and five additional CRA commitments to Small Business. The FR needs to be familiar with the document to ensure that, in the course of their dealings with claimants, they respect all of the claimant’s rights and they otherwise conduct themselves within the spirit of the document.
Due process is linked closely to the Bill and should result in a review that is both fair and impartial. Due process is mentioned in many other places in the CRM. The principles described in this chapter apply generally during all aspects of the review, particularly during conducting the detailed review described in Chapter 5. Failure to give the claimant due process could result in the review process not being defensible and, thus, the claimant could successfully challenge the CRA’s decisions at the Notice of Objection stage (refer to Chapter 2.6.2). A claimant can still be given due process even if some procedures in the CRM are not followed, or are followed in a different order than presented. For example, if the FR did not review certain documents during the site visit, their review at the proposal stage would correct that situation. Therefore, it is the treatment of the claimant as a whole during the entire review process that 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.
Eight principles of due process, and the particular taxpayer rights that they derive from, are as follows:
- The claimant is provided service in their official language of choice. (Taxpayer right No. 2)
- The claimant is given information about the review process, the issues being examined and, in general terms, the planned approach to resolve the issues. (Taxpayer rights Nos. 5, 6, 10)
- The claimant is informed of all options and remedies available to them if disagreements cannot be resolved at the end of the review. (Taxpayer rights Nos. 4, 9)
- The claimant is given information on the CRA requirements and what information the CRA needs to satisfy them. (Taxpayer rights No. 6)
- The claimant is given an opportunity to present their position, ask questions, express their concerns and provide further information at any point during the review. (Taxpayer rights Nos. 1, 5, 15)
- The claimant is given adequate opportunity to rebut our position or submit additional information after a proposal letter has been issued. (Taxpayer rights Nos. 1, 5, 15)
- The claimant is given sufficient information that explains clearly the rationale for our decisions. (Taxpayer rights Nos. 5, 6, 9, 11)
- Our decisions are fair and impartial and reflect current legislation and policy. (Taxpayer rights Nos. 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.
The CRA requires that its employees deal with claimants in a transparent manner. This entails being open and frank with the claimant when discussing the issues under examination. For instance, when requesting information, the FR should explain why the information is needed to resolve the issues. By performing one’s duties in a transparent manner, the FR facilitates a better understanding of the CRA’s position by the claimant and improves the working relationship with the claimant by building trust.
1.7 Minimum Review Requirements for the FR
This chapter outlines the minimum requirements for any review of a claim. 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.
1.7.1 General Requirements
- Follow all CRA approved procedures concerning:
- communication of information to the claimant and / or their authorized representative;
- safety and security;
- information security; and
- provision of service to the claimant in their official language of choice.
- Documentation requirements:
- Document all relevant review steps including audit procedures (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 working papers that explain the decisions and the rationale, and a Financial Review Report (FRR) using the appropriate format.
- Keep and organize working papers and supporting documentation in the file.
- Consult the FRM, if required, when:
- There are contentious or problem situations.
- There are questions about the application of policies.
- Referrals or outside consultation is needed.
- The review plan requires approval.
- A claim will be disallowed for lack of information.
- Penalties are being considered.
- Fraud is suspected.
- A requirement for better books and records is needed.
- Local policy requires approval of the FRR.
- Waivers may be required.
1.7.2 Coordinating the review
If an RTA is assigned to the claim, coordinate the review with them. Refer to Chapter 3, "Guidelines for Coordinated Reviews".
1.7.3 Planning the review
Prepare a written review plan, which includes the following:
- scope of the review;
- major issues / concerns; and
- planned approach to resolve the issues / concerns.
1.7.4 Conducting the review
- Explain to the claimant the review process, the issues identified and the planned approach to resolve them.
- Give the claimant a copy of the "Mutual Expectations" document (appendix 3).
- Communicate the options available to the claimant for resolving any of the issues.
- Give the claimant information on the CRA requirements, including documentation requirements, and explain what information the CRA needs to satisfy them.
- Give the claimant a reasonable opportunity to present their position, ask questions, express their concerns and 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 issues.
- Document communications and meetings with the claimant, managers, co-workers and others who are relevant to determining the eligibility of expenditures and making other decisions.
- Obtain any documentation from the claimant necessary to support the expenditures claimed.
- Prepare the proposal letter package by providing any required explanation of the proposed adjustments.
- Attach the RTA’s SR&ED Review Report (if not previously provided).
- Respond in a final letter to the claimant’s concerns, rebuttal or additional information provided relating to the FR’s decisions as reflected in the proposal letter package.
1.7.5 Finalizing the review
- Prepare the Financial Review Report.
- Complete the AIMS coding.
- If required, provide the file to the FRM for approval.
- Send all required processing information to the TC.
The appendices in the CRM include the following:
- Appendix 1 Glossary of terms
- Appendix 2 Acronyms and initialisms
- Appendix 3 Working with the Claimant: Mutual Expectations
- Appendix 4 Functional Currency Reporting
- Appendix 5 Partnership Claims for SR&ED
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