SR&ED 2002 Client Survey Results - Comprehensive Report

Monitoring the Performance of the Administration of the SR&ED Program - Survey Results

The document is also available in .pdf format.

• 1.0 Executive summary
• 2.0 Introduction
• 3.0 Methodology
• 4.0 Web survey findings
• 5.0 Case study findings

1.0 Executive Summary

In the late 1990's, industry concerns about the consistency and effectiveness of the Scientific Research and Experimental Development (SR&ED) tax credit program led to a major effort by the Canada Revenue Agency (CRA) to improve the agency's administrative practices for the program. A 13-step action plan was implemented by CRA.

A major industry association, the CATA Alliance, with the support of KPMG, conducted an initial survey in 1999 to find out industry's views on the administration of the SR&ED program. The survey focused on the software/telecommunications sectors, and the survey report was published in February 2000. While CRA viewed this pilot study as providing useful information, the agency stated that it needed further development, e.g., to provide coverage of all industry sectors.

As a result, CRA engaged KPMG Consulting in February, 2001 to develop a performance metric that would provide an annual "report card", based on feedback from a broad cross-section of Canadian-based companies, on the administration of the SR&ED Program. The goal of the study was to develop a methodology for gathering feedback from a broader cross-section of Canadian industry, but not to provide an undue burden on companies (the 1999 CATA survey involved in-depth telephone interviews). The study was also to implement the recommended methodology.

The study was divided into two phases. Phase 1 involved the development of the study methodology, which included the development of the Web survey instrument and the case study interview guide. Both survey instruments were developed by our tax panel from the accounting firm KPMG and in conjunction with SR&ED Program management. The survey instruments examined the experience of claimants in their recent audits, their perception of the assistance and guidance provided by CRA, how well they understand CRA's policies and practices, and their perception of fairness and professionalism of the process. The survey instruments are contained in Appendix A and B.

Phase 2 involved the conduct of the two surveys, which were carried out between July and November 2002. The Web survey gathered feedback from 306 companies, while the case studies involved interviews with 27 companies. The key findings from this study are as follows:

• Respondents were satisfied with the various services (e.g., Pre-claim Project Review Service (PCPR), Account Executive Service, Information Seminars) provided by CCRA to assist companies claiming SR&ED tax credits.
• Close to two-thirds of case study (61.5%) and Web-survey (61.1%) respondents indicated that the consistency of the CCRA review process has improved over the years.
• Approximately 81% of Web-survey respondents indicated that they were treated fairly by CCRA in its review of their SR&ED claim.
• Respondents were least satisfied with the following aspects of their review: turnaround time in CCRA's processing of their claim, and CCRA's advising if they were eligible for a larger credit than was initially claimed.
• A small percentage of Web-survey (2.9%) and case study (3.7%) respondents indicated that the relationship with the SR&ED Program staff has deteriorated over the years.
• The majority of respondents indicated that CCRA staff limit their role to their area of expertise. Approximately 88% of case study respondents agreed that their science advisor limited their role, while 95% indicated that their financial auditor limited their role to their area of expertise. This is a significant improvement from the 1999 CATA/KPMG pilot study.
• Items questioned most closely during financial on-site reviews were: time records (33.3%), treatment of materials consumed (29.6%) and treatment of contract payments received (29.6%).
• One-third (35.7%) of case study respondents did not find their financial reviewer to be helpful in explaining why expenditures did not qualify, and 26.7% noted that they were not helpful in explaining what supporting information was needed to justify allocation of expenses to SR&ED.
• The majority (81%) of case study respondents found their science advisor to have been helpful in explaining why a claim met or did not meet the definition of SR&ED, and what evidence is needed to demonstrate eligibility (76%).
• Over one-half (55.6%) of case study and 79.3% of Web-survey respondents indicated that the SR&ED Program has contributed to making their company more successful. More specifically, the SR&ED Program has been effective in encouraging respondents to conduct more R&D (73.1%), and in increasing company profitability (58.3%).

It is apparent from the study findings that there has been significant improvement in the SR&ED administrative process since 1999, and that the steps taken by CCRA to improve the program have been successful. While progress is evident, respondents continue to express a need for: greater clarity and simplification in CCRA forms, a more useful information guide, and better turnaround time in the processing of their claim. Continued improvement in these areas will ensure that industry will continue to view the SR&ED Program as an effective and well-administered tax incentive program.

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