SR&ED Common Mistakes: Why Claims Get Rejected and How to Avoid Them

SR&ED is a self-assessed program. Most claim failures cluster around the same set of mistakes — documentation gaps, mischaracterized work, and financial inconsistencies that CRA reviewers know to look for.

Mistake 1: Describing the Solution, Not the Uncertainty

What it looks like: "We developed a machine learning model to predict customer churn. The model achieved 89% accuracy."

Why it fails: This describes the outcome, not the uncertainty. CRA wants to know what you didn't know before you started.

Fix: Rewrite every narrative from the perspective of the engineer at the start of the project, not the engineer looking back at a success.

Mistake 2: No Contemporaneous Documentation

CRA reviewers ask for records created during the work.

What counts: Git commit messages, Jira tickets describing the problem, Slack threads where engineers discuss failed approaches, sprint retrospective notes mentioning technical blockers.

What doesn't save you: A retrospective SR&ED documentation spreadsheet created in month 12.

Fix: When an engineer hits a genuine technical unknown, they create a ticket. It describes the uncertainty, the approaches tried, and the outcome. Ten minutes per issue, worth thousands per engineer per year.

Mistake 3: Claiming Routine Development

Commonly misclassified as SR&ED: - Integrating third-party APIs - Standard database schema design - Building CRUD applications or admin interfaces - Performance optimization with well-known techniques (adding a cache layer) - Implementing algorithms that already exist in published form

The test: Could a skilled contractor with standard professional knowledge solve this in a reasonable timeframe? If yes, it's probably not SR&ED.

Mistake 4: Weak Time Allocation Records

What gets challenged: Round-number allocations with no supporting evidence. Allocations that don't align with the project descriptions. No records at all.

Fix: Use sprint data, issue trackers, or time-logging tools. A spreadsheet correlating project tickets to work periods is defensible if internally consistent.

Mistake 5: Missing the 18-Month Filing Deadline

SR&ED claims must be filed within 18 months of the end of your fiscal year. There are no extensions. Companies that miss this window lose the claim permanently.

Mistake 6: Claiming Foreign Employee Costs

Only work performed in Canada by Canadian employees or arm's-length Canadian contractors is eligible. Non-Canadian employees do not qualify.

Mistake 7: Paying 25–30% to a Contingency Consultant

A $400,000 claim with a 30% contingency fee costs you $120,000. For that money, you funded someone else to document your own work.

The contingency model made sense before AI-assisted platforms existed. For first-time or routine claims, use a platform. Keep a consultant on retainer for audit support only.

---

The SR&ED program rewards documentation discipline more than it rewards brilliance. The companies that recover the most started tracking what they were doing from day one.