Engineering claimants have experienced difficulties with the SR&ED program in recent years. The confusion comes from the definition of engineering, which is by its very nature “routine”. In fact, CRA recently changed to glossary. The term “routine engineering” has been replaced with “engineering“. To complicate matters, “engineering” is clearly recognized as an eligible supporting activity, so why so much controversy? Because, that supporting activity must be commensurate with an established technological obstacle. If your obstacle isn’t framed properly, then your claim can be easily denied.
In March 2015, the Tax Court of Canada overturned a CRA denial that involved engineering. This was the printer case. Read the article written by our expert.
In order to establish an eligible project that involves engineering, you will probably need to establish that there exists some system uncertainty.
From the CRA Glossary: “System uncertainty is a form of technological uncertainty that can arise from or during the integration of technologies, the components of which are generally well known. This is due to unpredictable interactions between the individual components or sub-systems.”
Even though the Tax Court of Canada has rejected the approach of breaking a project down into smaller parts, CRA still uses this approach to deny projects.
You will need to demonstrate that your project involves technological obstacles, and not just a series of technical problems. If you find this confusing, you’re not alone. You might need the help of an expert if your case involves engineering and system uncertainty.