CRA SR&ED audits, which are also commonly known as CRA reviews, are an inevitable aspect of SR&ED Tax Credits. Because you can expect these audits to occur at one point or another, it’s important to be prepared for them ahead of time. For the unabbreviated version, check our the CRA source documents.
Once your company has been reviewed, you may have to be reviewed again in the future. Some businesses may be subject to back-to-back reviews, while others might only have to undergo the auditing process once every few years. It’s also worth noting that CRA reviews are strictly a part of the CRA SR&ED program. As a result, you don’t need to worry about being reviewed outside of your SR&ED claim.
Here are the four main types of CRA reviews and what each of them entails.
If you’re a first-time claimant, there’s a good chance you will be selected for a FTCAS. The CRA will then visit your business to conduct an information session. During this information session, the CRA will discuss the claim with you, give a presentation on the SR&ED program and offer recommendations regarding future claims.
The goal is to determine whether there are any necessary improvements and if there needs to be a financial or technical review the following year. The CRA will also verify that you understand what the SR&ED program is and how it works.
A desktop review means that someone has manually reviewed your SR&ED claim. During this process, the CRA may make the decision to escalate the desktop review to a financial review or a financial and technical review. Otherwise, you can expect to receive a letter from the CRA stating that they have completed the desktop review.
During a financial review, the CRA reviews the financial aspects of your claim without auditing its technical aspects. It’s important to keep in mind that this type of CRA audit is chiefly a mechanical exercise. The main goal of the financial review is to recalculate your claim and ensure that it was prepared correctly.
Unlike the financial review, which only includes a review of the financial aspects of your claim, the financial and technical audit involves a review of both the financial and technical elements of your claim.
Not only is this the most common type of CRA SR&ED review, but it’s also the most important one. As part of the financial and technical review, the CRA will conduct an onsite interview, give a request for information, review your documentation and more. The ultimate goal of this audit is to determine whether you’ve met the technical requirements of SR&ED Tax Credits. The CRA will also decide if the claimed expenditures are appropriate.
This is generally a time-consuming process. It can delay the refund payment for months and decrease the size of your claim. However, the outcome of the financial and technical review ultimately depends on the type of claim you made and the nature of the review. As always, please refer to our complete guide to give you a full overview of the SR&ED claim process.
Do you have a SRED question? Planning for the future or perhaps you want to know how much your claim might be? Don’t worry, our CPA is always ready to answer any question. Get a SRED expert in your corner.