The Canada Revenue Agency (CRA) has just released a new policy and procedures document in which it outlines five questions to determine eligibility of work for SR&ED investment tax credits. This approach supplements how the three criteria (scientific or technological advancement, scientific and technical content, and scientific or technological uncertainty) are applied by providing a logical order for assessing them.
Below are the five questions along with definitions from the CRA:
1. Was there a scientific or a technological uncertainty – an uncertainty that could not be removed by standard practice?
Scientific or technological uncertainty means whether a given result or objective can be achieved or how to achieve it, is not known or determined on the basis of generally available scientific or technological knowledge or experience.
Standard practice is the application of techniques, procedures, and data that are generally accessible to competent professionals in the field.
2. Did the effort involve formulating hypotheses specifically aimed at reducing or eliminating that uncertainty?
A hypothesis is a tentative supposition with regard to an unknown state of affairs, the truth of which is thereupon subject to investigation by any available method, either by logical deduction of consequences that may be checked against what is known, or by direct experimental investigation or discovery of facts not hitherto known and suggested by the hypothesis.
3. Was the adopted procedure consistent with the total discipline of the scientific method, including formulating, testing, and modifying the hypotheses?
Scientific method is a systematic approach to performing SR&ED that includes defining a problem, advancing a hypothesis towards resolving that problem, planning and testing the hypothesis by experiment or analysis, and developing logical conclusions based on the results.
4. Did the process result in a scientific or a technological advancement?
Scientific or technological advancement is the generation of information or the discovery of knowledge that advances the current understanding of scientific relations or technology.
5. Was a record of the hypotheses tested and the results kept as the work progressed?