Financial Evidence

Similar to technical evidence, the CRA requires financial evidence in the event of a CRA SR&ED audit. This would consist of the existing financial accounting records such as T4s, invoices, and contractor contracts.

These items will need to be collated into a financial report that ties to the amount claimed in each of the three categories prior to filing.

For example, if you have four material invoices, you will need to show the CRA how the total of those invoices agree to the claimed amount.

Invoice 1 $1,200.00

Invoice 2 $200.00

Invoice 3 $567.50

Invoice 4 $100.00

Total $2,067.50

However, there was $500 on Invoice 1 was for a website visual redesign, which is not eligible for SR&ED. This creates a difference between the invoice total and the SR&ED total as the redesign needs to be excluded from the claimed amount. So when the SR&ED claim is filed for $1,567.50 but in the audit process, you submit $2,067.50 in material expenses to the CRA, they will not know what was included or excluded and why. Therefore a summary of the claimed amounts must accompany the invoices to correctly breakdown the invoices into the claimed and unclaimed amounts. This same principle applies to salaries or wages as well as contractor invoices.

It is imperative that this is done in advance as the CRA requires that these items are sent to them within the first 14 days of an audit.