When it comes to selecting a SR&ED consultant, the task is usually assigned to the CFO, or in smaller organizations, the owner. The selection process is typically based on receiving recommendations from a trusted friend or business associate. However, it is worth considering what exactly you want in a SR&ED consultant and what value he/she can bring to your organization.

Like most consulting groups, there is a wide range of service offerings within the SR&ED consultant community;

• Some consultants will only review SR&ED claims, but the client prepares the claim;
• Some will only prepare the project descriptions and won’t gather the SR&ED costs;
• Some will prepare the whole claim but only for specific industries;
• Some will provide CRA audit defense services, others don’t; and
• Some consultants, in addition to SR&ED, will also help you obtain other government assistance services such as applying for various available grants related to hiring, training, marketing and business expansion.

Furthermore, there is a stark difference in the quality of service and depth of business perspective between a consulting firm that has prepared thousands of claims and a firm that has prepared only a handful.
When selecting a SR&ED consultant, you should be looking for someone who can:

• Take as little of your time as possible for claim preparation;
• Maximize the monetary value of the claim;
• Minimize the risk of claim review/rejection by the CRA, and will be there, if and when CRA comes knocking for an audit; and
• Charge you a fair price at market or slightly below

Some common scenarios you might encounter when you compare your options:

1. Consultant A charges 10% of the successfully claimed amount and consultant B charges 20%. Should you choose consultant A? What if the claim consultant X can put together will only fetch $50K, and consultant B’s claim will be double that, $100K? Your net benefit with consultant A will then be $45K, and with consultant B $80K. You get what you pay for. If someone is charging you much less than the standard rates, it means they are cutting services. For a 10% success fee you are likely working with a consultant who is getting you to put the claim together and merely reviewing your work, but more importantly your claim is not being maximized.

2. Consultant C creates a claim, where he/she observes all the SR&ED eligibility rules and clearly showcases technological uncertainties, systemic investigation, etc. Consultant D stretches and bends the reality with the sole purpose of increasing the claim value, and with only lip service paid to eligibility rules. How will you feel when CRA comes in to audit the claim when an aggressive claim has been filed? Under the current rules CRA imposes penalties when SR&ED claims don’t adhere to its rules.

3. Consultant E might offer a different service level than Consultant F. For example, Consultant E might require you to prepare the project descriptions yourself, or might not provide any support in case of a review of your claim by the government, where Consultant F might offer additional services for their larger fee, such as real-time claim preparation and project documentation, preparation of the project descriptions from interviews with your staff, and full claim review support.

Key Competencies to Look For

A professional and seasoned consultant who claims to possess deep insight into the ups and downs of tax credit return and government expectations should be able to review all of your projects and explain why he/she chose certain projects for the SR&ED claim and not others. This is critical. You should feel 100% confident that you have claimed everything you can under the SR&ED program.

A good consultant will prepare the claim in a way that highlights the technological aspects of your projects, which may involve grouping activities from multiple business projects into different technological projects to showcase incremental technological advancements across a particular area of technology. However, you must also be able to understand and recognize the activities included in the claim and how they correlate to your business projects; you will have ultimate say in which costs get allocated to the SR&ED projects and you will be the one signing off on the accuracy of the information in your tax return. Your consultant should be able to explain this to you clearly and concisely.

Prior to submitting the claim, the consultant should walk you through the claim and demonstrate how all projects were considered to maximize the claim. An indicator of a consultant’s dedication to service quality is his/her willingness and ability to take a seat in CRA review meetings. However, more importantly, the consultant should have a good procedure for CRA audits. This includes coaching and mock interviews prior to a CRA review. The consultant should also work with you to make sure you have the appropriate documentation at the CRA review and take the lead in the meeting to explain your situation. CRA will ask leading questions to try to trap you into answering a question incorrectly so they can deny your claim. Often, the question appears innocent and you are not even aware that you are providing CRA with a response that can deny your claim.

Finally, since CRA requires contemporaneous evidence, the consultant should offer a process to identify, capture and document the SR&ED claim while you do the work. This process should be:

• Be easy to use
• Capture the work contemporaneously to when it is carried out
• Augment the system you already have in place
• Create additional information for your business that is useful in product development, not just for the SR&ED claim.

Take the time and ask yourself the following:

• Am I 100% confident that we are claiming all the SR&ED projects and costs we can?
• Do we have a system to identify, capture and document SR&ED on a real time basis that integrates well with other product development processes?
• Will our SR&ED consultant be there when CRA comes in to review the claim; and are we confident the consultant has a good process and reputation with CRA to defend our claim?

If the answer to any of the above questions is no, you should consider finding a SR&ED consultant who has a holistic approach to delivering SR&ED services as explained above.

Our experienced consultants can provide you with the expertise required for connecting innovation with your bottom line. An integrated approach, a result-oriented process and a comprehensive range of services help optimize your chances of success.

Contact us to schedule an appointment for a free assessment. We can help determine your eligibility for SR&ED as well as for government grants, and share more information about innovation funding:
[email protected]

Arne Luik is Vice President of Sales at RDP Associates