The lack of an acceptable, transparent strategy to deal with the Budget commitments on SR&ED especially redress after this many months, and the impact of the situation on the competitive positions of Canadian businesses if this is allowed to continue is unacceptable.
This SR&ED Alert concerns intelligence that we have gathered regarding adverse changes to Canada’s SRED Tax Incentive program, de facto changes being implemented without any industry input. We are asking for your immediate intervention and engagement in protecting the integrity of the SR&ED program, critical to the success of the Government’s efforts to support business in these difficult times.
The concern is that the positions and guidance that the CRA will be putting forward to the community as their new operational practices reflect, at best, highly subjective positions and guidance. Unfortunately, these seem to be attempts to codify the highly restrictive positions and practices that have been associated with the most restrictive, problematic and difficult administrative periods of the program.
For details, please request a briefing paper of current CRA positions and practices from CATA President John Reid, at email, firstname.lastname@example.org with SR&ED Alert in the Subject Line. Russ Roberts, CATA Sr. VP, Tax and Finance, and SR&ED Team Leader, is also available to respond to specific questions and information requests.
Of particular concern is the impact of the very restrictive position being adopted by the CRA on what is eligible as Experimental Development for the credits. When questioned, officials inform us that that there is no need to discuss any of these matters further: CRA staff training, now underway is focusing on how the revised policy applies, in other words, a fait accompli.
Specifically, this new CRA position and policy will put into jeopardy engineering claims in the audits when it is applied by the reviewers and it was the source of much of the negative commentary received last year in the Budget consultations. We are already hearing that this position is becoming more frequent in the reviews. If applied universally, it would greatly reduce the effectiveness of the credits, particularly where new advances in the applications and extensions of existing technologies must be developed and validated.
++ Action Items: Please contact your local MP and request support for the community call for consensus-building consultations by the CRA on how to effect the needed improvements to the SR&ED program. State that a transparent process of consultations is needed before the CRA proceeds to issue any practice guidance, policy or positions. The timing is critical as we understand that policy positions and new guidance are scheduled to be rolled out unilaterally without such a dialogue.
++ Please circulate this Alert to your colleagues, both in the public and private sector, including media and trade press and seek to engage them in this advocacy. CATA is already working with other key sectors and interest groups in this regard.