SR&ED Documentation Do’s and Don’ts

As the calendar year comes to a close, it also marks fiscal year-end for many Canadian companies. This is the point when teams begin preparing their upcoming SR&ED claims, pulling together technical narratives and financial support for work completed over the year. Having strong documentation habits in place before this process begins can significantly reduce stress, rework, and audit risk. The do’s and don’ts below outline what effective SR&ED documentation looks like and where companies often go wrong.

SR&ED documentation not only helps a company track progress but also provides the evidence needed to support claim eligibility. While the CRA typically reviews these supplementary materials only during an audit or formal review, clear and complete records reduce the likelihood of disputes and helps to speed up the process. In practice, this includes project summaries, technical notes, meeting and decision logs, time and resource records, invoices and payroll details, pilot or test data, and more. However, companies can strengthen their SR&ED position further by adopting effective documentation habits and by avoiding common pitfalls. The following do’s and don’ts illustrate what helps (and what undermines) an SR&ED claim.

Do’s

1. Keep contemporaneous technical records. Record hypotheses, experimental setups, test results, and conclusions as they occur. Try to keep dated, specific notes with signed entries against specific SR&ED tasks. Ensure time records show who did the work, dates, hours, and the nature of the task, as this reduces the need for later reconstruction.

2. Structure documentation around projects. For each SR&ED project, maintain a short project brief that states the technological objective, the uncertainty being addressed, the approach, and success criteria. This will help claims reviewers follow the chain of reasoning more easily.
3. Keep your data. Preserve source control commits, prototype photos, test logs, configuration files, instrument output and spreadsheets that show raw data and demonstrate that experiments were performed. Store records for / potentially beyond the statutory period and ensure they are accessible if the CRA requests them. 
4. Document decision points and why alternatives were rejected. Record why one approach was selected over alternatives and retain interim design files, unsuccessful trials, and scrap records so the full investigative path (including what didn’t work) demonstrates a systematic investigative process rather than routine engineering / optimization.
5. Organize financial evidence to match projects. Keep invoices, contracts, subcontractor agreements / invoices, and payroll records tied to project codes used in your SR&ED claim.

Don’ts

1. Don’t retroactively reconstruct technical evidence. Rewriting notes months later or undermines credibility.
2. Don’t claim routine work. Work that follows standard engineering practice without investigating technological uncertainty is not SR&ED eligible. Ensure claims focus on activities where the outcome was not known in advance.
3. Don’t ignore small administrative details. Undated documents or unexplained gaps in records can invite deeper scrutiny in audits.
4. Don’t mix marketing materials with technical evidence. Business plans, pitch decks and marketing briefs do not demonstrate experimental development. Try to keep these separate unless they document commercialization (e.g. upscaling) that followed eligible work.
5. Don’t rely on verbal updates. If key decisions, experiments, or design iterations live only in conversations, they cannot support a claim during a review. Try to keep notes during meetings, as these can be used to support your claims.

Strong SR&ED documentation not only supports eligibility but also makes projects easier to manage. Clear technical notes, reliable time tracking, organized financial records, and structured evidence collection set the stage for a smoother CRA review with fewer surprises. In the next fiscal year, try building SR&ED record-keeping into the daily workflow and treating it as part of the technical process rather than an after-the-fact task; you’ll likely see a improvement in both claim quality and efficiency. And if you’d like guidance on strengthening your approach, feel free to reach out to us to learn more about SR&ED best practices.