The Canada Revenue Agency (CRA) has updated its guidance on SR&ED review, specifically by expanding how it explains the review of both scientific work and associated expenditures.
While this isn’t a change to the program itself, it reflects a clear expectation: businesses must be ready to demonstrate their claims clearly, consistently and with evidence.
Here’s what that means in practical terms.
Your SR&ED costs must be traceable
The CRA now outlines in more detail how it expects businesses to track and report expenditures.
If you’re claiming costs under the SR&ED program, you’ll need to show:
- How those costs were tracked
- When the work was performed
- Who did the work
- How the costs link directly to the scientific or technical efforts
Cost calculation must be supported by internal records like timesheets, project logs, technical notes and financial documentation (e.g: general ledger, pay registers, T4s, R1s..).
Reviewers may ask for a virtual or on-site tour
To better understand the claimed work, CRA reviewers may request a virtual tour of your facility or process. This can be as simple as:
The goal is to place your technical work in context and make your claim easier to verify.
Supporting information is critical
Reviewers will ask to see the documentation you referenced in your SR&ED claim (especially lines 270 to 282 of Form T661).
This may include:
- Technical records (e.g: lab notes, test results, prototypes, photos, version history)
- Employee logs or project timelines
- Meeting notes or internal communications
- Any evidence showing how work progressed and who was involved
The more specific and date stamped your records are, the stronger your claim.
Financial documentation is equally important
Beyond technical evidence, your financial reporting must be detailed. Reviewers may request:
- Financial statements
- General ledger reports
- Source documents like contracts, invoices or timesheets
- Payroll summaries and proof of time spent on SR&ED activities
Disorganized or missing records can result in reductions or denials, even if the work itself is eligible.
What happens after your review?
At the end of the SR&ED review meeting, the CRA typically provides a verbal or a written feedback in the form of an eligibility report outlining the following:
- Review approach
- List of supporting evidence submitted
- Eligibility determinations (including the project background, understanding of the work performed, eligibility determination)
CRA may request additional documents after the review meeting and before submitting their eligibility report. In that case, the timeline to submit such supporting evidence will be agreed upon between the two parties during the review meeting.
If disagreements arise, there’s a clear process
If your disagree with the CRA’s findings, you have options:
- Submit written representations with new evidence
- Request further discussion with the reviewer or their manager
- File a formal objection within 90 days of your Notice of Reassessment
It’s important that your responses focus on facts and documentation not opinions or assumptions. All arguments should be backed by data and explained clearly.
To learn more about how audits work from an Innovation Funding Manager, watch our webinar replay on optimizing your SR&ED claims, strategies and audit preparation!
The CRA’s updated guidance doesn’t introduce new rules but it raises the bar on clarity and documentation. The process is now more transparent, but also more rigorous.
For businesses, this is a reminder to treat SR&ED claims not just as a tax exercise, but as a structured process that requires careful internal alignment between technical, operational and financial teams.
Being prepared can mean the difference between a smooth review and a denied claim.
Need guidance preparing your SR&ED claim?
At Leyton, we help Canadian businesses structure strong, compliant SR&ED claims, every step of the way!
