The Importance of Documentation & Time Tracking With an SR&ED Claim

April 27, 2021

The Scientific Research and Experimental Development program (SR&ED) is a very lucrative cash or credit incentive at 15% – 35% depending on a company being CCPC or Non-CCPC. The program approves SR&ED claims based on either basic research, applied research, or experimental development that is trying to achieve advancements in scientific knowledge with a specific practical application in view (trying to solve the unknown). Many companies across Canada qualify based on the criteria however companies seem to miss out on the tax credit due to improper documentation and time tracking of SR&ED hours. Canada Revenue Agency (CRA) needs to see in good faith that the SR&ED projects undertaken by a company were their work within the fiscal year-end claimed. Many companies have ground-breaking products, services, and ideas but when it comes to documentation, they see this as very time-consuming and not worth it. ABGi Canada outlines the importance of documentation and time tracking when it comes to submitting an SR&ED claim by providing tools & expertise to assist in a much easier process.

Proper Documentation
With many new reviews introduced by CRA over the last couple of years (CAS, FTCAS, Financial reviews, etc.), it is important to document everything SR&ED-related. If a company is selected for review and no documentation is taken the company will sadly be rejected of their cash or credit.

The SR&ED program requires that documentation be:

• Contemporaneous – produced at the time activities claimed occurred.
• Dated – in the context of the fiscal period.
• Covers all steps of the systematic investigation including obstacles, hypothesis, tests, analysis, and lessons learned.
• Differentiates between routine and non-routine activities.
• Link’s labour and other expenditures to key elements of the systematic investigation (scientific method)

Some examples of proper documentation for an SR&ED project are:

• Design diagrams, test results, project plans, worksheets, and/or timesheets.
• Lists of employees involved in the activities and their roles, duties, or relevance to the activities.

Time Tracking
Just like documentation, time tracking is also very important to show CRA that routine work or admin work has been properly separated from SR&ED projects. Every company would love to charge 100% of their time to SR&ED but can it be proven? There are companies that introduce their own software programs but for others, a well-established product needs to be used by all staff. Below are some examples of software’s we have either used or have had clients use for SR&ED time tracking accuracy.

Some time-tracking products to invest in, for SR&ED are:

• Replicon
• Harvest
• BambooHR
• FreshBooks
• Asana
• Excel spreadsheets only for start-ups. Some software products might cost too much for start-ups and at a bare minimum, every company should be tracking time. Excel will allow a company to separate SR&ED time from routine or admin work.

***We do not recommend free products for time tracking as it limits a company’s ability on users as well as if any modifications are needed.***

In summary, a well-thought-out SR&ED Tax Credit Claim is more than the uncertainty of technological advancement, but the establishment of proper documentation and time put into the project. We at ABGi strive to assist all clients with every single nuance of an SR&ED Tax Credit Claim.

How can ABGi Canada assist?
ABGi Canada takes a 7-step approach to maximize every R&D Tax Credit Claim filed to CRA (Detailed description of the 7-step approach).

1. Initial Exploratory Meeting
2. Offer of Service & Presentation of Offer
3. Kickoff Meeting & Preliminary Project Identification Stage
4. Science Data Compilation Phase
5. Financial Data Compilation Phase
6. Project Review & Finalization
7. SR&ED Claim Submission to CRA

For further information on how ABGi Canada can assist your company in successfully preparing an SR&ED Tax Credit claim to CRA, please contact us today.