What to Expect When Your SR&ED Claim Gets Reviewed: A Business Owner's Guide

Getting that call from the CRA about your SR&ED claim? Here's everything you need to know to navigate the review process successfully. You've filed your Scientific Research and Experimental Development (SR&ED) claim, and now you've received a call from the Canada Revenue Agency. Your claim has been selected for review.

Take a deep breath—this isn't necessarily bad news. In fact, it's a routine part of the SR&ED program that helps ensure the system works fairly for all Canadian businesses. Let's walk through what happens next.

Why Was Your Claim Selected?

First, understand that every SR&ED claim goes through a risk assessment. Your selection doesn't mean the CRA suspects fraud or wrongdoing. It simply means they need more information before processing your claim. Common reasons for selection include unclear project objectives or timelines, uncertainty about what work was actually performed, questions about whether the work qualifies as systematic investigation, mix of SR&ED and non-SR&ED activities that need clarification, and expenditure claims that require additional documentation.

Think of it as the CRA saying: "Your work sounds interesting, but we need you to paint us a clearer picture."

The Review Process: Your Roadmap

Phase 1: The Initial Call and Preparation

When a reviewer calls, they'll cover several key points: who's handling your review (usually a research and technology advisor and a financial reviewer), the specific issues they've identified, scheduling your review meeting, and what information you'll need to provide. This initial call is crucial. Take detailed notes and don't hesitate to ask questions. The reviewers want to help you understand what they need.

You'll receive a follow-up letter summarizing the conversation, including any information requests (typically due within 30 days), a meeting agenda, and contact information for your review team.

Phase 2: The Review Meeting

Here's where the magic happens. Most reviews now occur virtually, which actually offers several advantages: easier scheduling across time zones, multiple team members can participate from different locations, no travel costs or time away from the office, and more flexibility for follow-up discussions.

During the meeting, expect to explain your work in detail, conduct interviews with people who actually performed or supervised the work, take a virtual tour where you might demonstrate your processes via video or screen sharing, and review documentation by showing the records you indicated having on Form T661. Remember: this isn't an interrogation. The reviewers are genuinely trying to understand your claim and help ensure you receive the credits you're entitled to.

Phase 3: Decision and Next Steps

After the meeting, you'll receive an SR&ED Project Eligibility Report explaining whether your work qualifies, details of any proposed adjustments to your claim, and recommendations for future submissions. If you agree with the findings, the process concludes with your assessment. If you disagree, you can provide written representations—additional information that might change the reviewers' decision.

Your Rights During the Process

The Taxpayer Bill of Rights protects you throughout this process. Key rights include service in your preferred official language, privacy and confidentiality of your information, right to representation where you can have someone speak for you, and formal review options if you believe you haven't received fair treatment.

What You Need to Do

Before the meeting, ensure key personnel are available, organize your supporting documentation, review any previous CRA recommendations, and prepare to explain your work chronologically. During the meeting, be transparent about both successes and failures, use technical terms you're comfortable with, discuss challenges and how you overcame them, and explain how you tracked costs and linked them to specific work.

After the meeting, respond promptly to any additional information requests. If you disagree with findings, provide clear, specific written representations and focus on facts rather than opinions.

Common Pitfalls to Avoid

Poor documentation means you should keep detailed, dated records as work progresses. Avoid vague project descriptions by being specific about objectives and methodologies. Don't mix SR&ED and non-SR&ED work—clearly distinguish between eligible and non-eligible activities. Maintain adequate cost tracking with clear links between expenses and specific projects. Most importantly, avoid a defensive attitude—remember, reviewers are there to help, not hinder.

What If You Disagree?

If you're not satisfied with the review outcome, you have options: discuss with the reviewers as sometimes concerns can be resolved through conversation, speak with their managers to escalate within the CRA if needed, request an administrative review to ensure proper procedures were followed, or file a formal objection to move outside the CRA's internal process (must be done within 90 days).

Making the Most of Your Review

Whether your claim is approved as filed or adjustments are made, treat the review as a learning opportunity. The feedback you receive can help you improve documentation practices, better describe future projects, strengthen your internal SR&ED processes, and avoid similar issues in subsequent claims.

The Bottom Line

An SR&ED review isn't something to fear—it's a normal part of the program that helps maintain its integrity. The vast majority of businesses that prepare properly and communicate clearly have positive experiences. Key takeaways: preparation is everything, transparency builds trust, documentation is your best friend, and the reviewers want to help you succeed.

Remember, the CRA's goal isn't to deny legitimate claims but to ensure the program works fairly for all Canadian businesses investing in innovation. By understanding the process and approaching it with the right mindset, you can navigate your review successfully while building a stronger foundation for future SR&ED claims.