File SR&ED Objection With The Tax Court Of Canada

March 09 07:24 2021

TORONTO – March 8, 2021 – Bond Consulting Group is an SR&ED Consulting firm in Canada. The vast majority of applications prepared by our firm are accepted as filed. However, The Canada Revenue Agency (CRA) will dispute or deny some cases from time to time. When that happens, the taxpayer has the right to file an Appeal with the CRA Chief of Appeals. It appears that there has been a shift in administrative practices at the offices of the Chief of Appeals.

In the past, when an Objection was filed, we found that the Appeals division made a concerted effort to study the case and the merits of the dispute. The Appeals Division often consulted with national experts before rendering a decision. In our experience, large volumes of evidence were carefully scrutinized, and responses were largely positive or partially positive. Over the past year, notably during the COVID shut-downs, responses have been demonstrably different.

Appeal Responses

After many months of lockdowns, Chief of Appeals began reviewing files again, approximately September 2020. Results are trickling in, and it appears that Chief of Appeals is maintaining the denied status on most Objections.

In many cases, the taxpayer waited up to two years for this negative response. If this trend continues, does it make sense to wait for the CRA appeals process?

Go to Tax Court

As Subject Matter Experts in the field of SR&ED policy and prevailing trends, we recommend that disputed cases be filed with the Tax Court of Canada after the mandatory waiting period of 90 days, and forego the lengthy two-year delay as the case sits with Appeals.

In Tax Court, Appellants benefit from a straight-forward legal process. The Appellant is dealing with a trial lawyer that represents CRA, and an independent Tax Court Judge. Additionally, the Appellant is given the opportunity to be heard if the case advances to trial.

This is a notably different process than appeals, which does not allow for any interviews or verbal presentations. An Appeals officer never meets the taxpayer, and bases decisions entirely upon written submissions.

In the Tax Court arena, CRA lawyers may choose to be prudent or cautious, because negative decisions are published and set precedents, which is a risky proposition for CRA if they lose. A Tax Court judgment can create a precedent that conflicts with existing CRA policy. In addition, it is a little-known fact that the Appellant needs only to prove their case “on the balance of probabilities”. The Judge needs only be convinced that “it’s more likely than not”, that the work qualified under the SR&ED program guidelines. If the judge is convinced that the Appellant has passed the bar of 51%, then the claim will be approved, plus many years of accrued interest. There is also a chance that the Judge will award costs to the taxpayer, adding further penalty to CRA.

For this reason, a Tax Court Appellant is likely to engage in a reasonable settlement process on cases that are likely to succeed in front of a Judge.

Especially important for Medical Professional Corporations (MPCs)

Over the past 10 years, The CRA has rejected or denied a large volume of MPC cases, due to confusion with policy interpretations relating to research activities that may appear to be affiliated with academic institutions. It is our understanding that many MPC Notices of Objections have sat dormant with CRA Chief of Appeals for as many as four or five years. In the coming year, we expect the Chief of Appeals to release a large volume of these MPC Objections with a confirmed negative opinion.

We therefore strongly recommend that MPCs that obtained a recent objection during SR&ED audit, or that have an unresolved Notice of Objection to file their case with the Tax Court of Canada, apply for a more expedient process that may also result in a positive settlement.

About Bond Consulting Group 

Bond Consulting puts you on the right path to understanding and accessing Canada’s most generous but also Canada’s most complicated corporate tax incentive program. With our talented analysts on staff, superior in-house expertise, government audit experience and sophisticated evidence tools, you can’t go wrong.

Bond is currently accepting SR&ED Rescue cases – i.e. Disputed claims that were not prepared by our firm.

For over 16 years, practically everything we have prepared has been approved.

Brands

To help Canadian companies better identify with the SR&ED Program, Bond Consulting Group has created SR&ED Brand verticals that present program eligibility in the following industries: Medical, Academic Research, Pharma, Biotech, Agriculture, IT & Computer Science, Manufacturing, Food Development, and Start-up.

You can find them listed and explained in the Sectors section of our website: https://bondconsulting.ca/sectors/ 

About Julie Bond, CEO of Bond Consulting Group

Julie Bond, aka “The SR&ED Whisperer”, is one of the top SR&ED tax credit specialists in Canada, with almost two decades of experience in this field. Julie has personally prepared or supervised over 2000 successful SR&ED applications. She graduated from Rotman School of Business, University of Toronto (E.MBA), and has a BA in Astrophysics and Languages from the University of Toronto.

FOR MORE INFORMATION:

Call Bond Consulting for your eligibility assessment: 416 503 4607; 1 888 SRED-007 or email us at [email protected]

Visit bondconsulting.ca to book a consultation with one of our talented Assessment Specialists. There is no financial risk. If you do not receive an approval, then our professional services cost you nothing.

Join us on LinkedIn for regular updates on SR&ED, technology, and professional development. 

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Phone: 1-888-SRED-007
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Website: bondconsulting.ca