The main aspects to determine if the claimed work meets the definition of SR&ED as given in subsection of the Income Tax Act and to resolve any issues associated with eligibility, the CRA uses three eligibility criteria:
- scientific or technological advancement;
- scientific or technological uncertainty; and
- scientific and technical content.
To establish this involves answering the following five questions:
1) Was there a scientific or a technological uncertainty—an uncertainty that could not be removed by standard practice?
2) Did the effort involve formulating hypotheses specifically aimed at reducing or eliminating that uncertainty?
3) Was the adopted procedure consistent with the total discipline of the scientific method, including formulating, testing, and modifying the hypotheses?
4) Did the process result in a scientific or a technological advancement?
5) Were a record of the hypotheses tested and the results kept as the work progress?
These questions follow the progression of SR&ED work from identifying the uncertainty, through carrying out the work for its resolution, to the resulting advancement. Following the progression of the work is a logical approach to assessing whether SR&ED has taken place.
There is SR&ED if the answer to all of the above questions is yes.
Per our experience at EVAMAX, the technological uncertainties encountered by one company may well be looked upon as facts easily gathered by another. With respect to the five preceding questions, consideration must be given to the technology base or level and the business environment of the individual company. Business environment characteristics include business size, competition, an area of industry, and access to technical resources.
However, it is expected that any company making a claim for SR&ED will have or will access the expertise necessary to carry out that work. Our consultants at EVAMAX use their wide experience and expertise in various fields of technology and the SR&ED program to differentiate routine engineering activities vs. SR&ED and maximize your benefits through the program.