Taxpayer’s Ombudsman Tackles SR&ED
Bill Thomson, P.Eng.
Whether it's election fever, or the growing number of SR&ED related Notice of Objections and Tax Court Canada pleadings, Ottawa is showing renewed interest in how well CRA has been administering the SR&ED Tax Credit Program. Many companies rely on SR&ED Tax Credits as a way of financing product and process development that makes them more competitive. Canada’s SR&ED Tax Credit program remains one of the best offered in the industrialized countries that Canada competes with.
Recently, the Government of Canada announced that the recently appointed Taxpayers' Ombudsman would undertake an independent enquiry to find out if CRA is giving fair treatment to taxpayers who submit SR&ED claims.
The position of the Taxpayers' Ombudsman was created in February 2008 by then Minister of National Revenue, Hon. Gordon O'Connor. In broad terms the Ombudsman has two mandates: The first is to investigate specific complaints that are service - versus outcome - related. The second is to proactively investigate "systemic issues" that are likely to escalate to a level where they negatively impact a large number of taxpayers. The SR&ED enquiry is related to the second, "systemic issue" category.
The announcement seeks taxpayer input, with respect to the "Systemic Enquiry" in the following areas of concern pertaining to incidents that occurred after February 21st, 2007:
Did CRA adequately inform taxpayers about the recent changes to the T661 form? It is important here to note that the focus is not the form itself, but rather how well CRA communicated changes in the T661 form to the taxpayer community; and if CRA allowed adequate and reasonable time for the taxpayer community to adjust to those changes. Therefore, when reporting incidents you should keep the government focus in mind and consider, not only the form itself, but also issues such as those resulting from the replacement of the "Technology or Knowledge Base or Level" requirement with the much more restrictive new term of "Technological Obstacles".
Has the cost of filing and defending an SR&ED claim changed? Will the new T661 increase the cost of preparing and submitting your SR&ED claim? Do you expect to spend more money to comply with CRA requirements for record keeping, time logs etc? Are you affected by the new requirement to submit project technical descriptions for all projects instead of the 20 largest, as was previously the case?
If some or your entire claim was rejected, did CRA accept your request for a "second opinion"? i.e.: an unbiased review by another auditor?
Did the CRA auditors assigned to review and audit your claim act in a professional and courteous manner? Did they exhibit bias against your industry or the technology topics associated with your claim?
Has any CRA person ever attempted to dissuade you from retaining professional advice or made negative reference to advisors' fees? Has any CRA person suggested you should avoid using a consultant or that consultant's fees are "too high"?
Taxpayers seeking to make a complaint to the Ombudsman on any of these topics can do so using the form available from the Taxpayer's Ombudsman website
While the space on the form is limited, it is permissible to attach additional pages as may be required to fully describe the issue.
Ottawa's last attempt at this type of review was the "SR&ED Satisfaction Survey" undertaken by CRA itself in November 2007. That survey elicited several hundred responses from all sectors of industry, industry associations and tax practitioners. Many of the findings from this survey were incorporated in the June 2008 iteration of CRA's SR&ED Small Business Action Plan and ultimately led to the introduction of a new set of forms (i.e. T661-08) for submitting claims.
Bill Thomson, P.Eng. Region Manager Scitax Advisory Partners SW Ontario