In order for the documentation to establish the work that was done related to SR&ED, it has to be contemporaneous. Meaning it should have been generated at the time the work was being carried out and not after the fact. The easiest way to establish this is by dating the entries as the information is being generated.
The documentation should show that there was a systematic approach to carrying out the work. In other words show that there was a technological obstacle that you were attempting to overcome using scientific methodology. I always think of high school science projects. The student is required to state the objective of the project, the methodology, data collected, analysis of the data and an inference or conclusion. Similarly when you are carrying out a project, you should establish the technological reason you are carrying out the project and not the business or commercial reason. Then describe how you are going about investigating the possible solution(s). In the process you will have to generate and collect some information to help you better establish the best approach to resolving the challenge. At some point you will have to draw some sort of conclusion. This could also be establishing that the there is no possible solution to your challenge. You don’t have to be successful.
Whereas the type of information generated will vary form industry to industry and project to project, the basic elements are the same. In science projects there are well established protocols and documentation is quite easy to generate and a necessity. Where it gets murky is when you are dealing with shop floor projects. Usually in this case there is no well defined approach to collecting data. It is not uncommon to capture the information on napkins. In some extreme cases the information is memorialized and not written down. This could work well internally for the company, but might not be enough to support an SR&ED project. The best practice is to ensure everyone involved in the project keeps a record of what they working on and the amount of time spent on a particular activity. This information is also pertinent to establishing the portion of an employee’s salary that is attributable to SR&ED. Train your employees to keep dated notes with descriptions of the work. It is always a good idea for the employee to keep note books for SR&ED projects. It is important to remember that a claim could be denied in the abscence of supporting documentation.
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