Copyright 2010 – Bruce Madole, CMC Let the games begin

Let the games begin

There’s nothing quite like the scent of money to bring out the corporate game

players and political opportunists, but if a company isn’t careful, these game players can

foul up a perfectly sound SR&ED program. Unfortunately, the very nature of the

SR&ED program makes this scenario more possible.

One phenomenon that seems to be unique to large organizations is the person I

like to call a “SR&ED Vulture”. (You could just as easily call them SR&ED Sharks, for

that matter.) These are usually a highly-placed or highly-connected manager (Director,

VP, …you name it) – who sees the evidence of real promise in the corporate SR&ED

program, and proceeds to make a play for control of the program.

There’s nothing like controlling the cash cow to impart a little clout.

Now, making their play may be as overt as “muscling in” or playing

“reorganization or re-alignment games”, and it can be surprisingly easy to accomplish.

After all, these are people with friends and contacts in high places, so you can expect

them to possess influence, already. Moreover, there are factors about any SR&ED

program that make it more vulnerable to games playing.

SR&ED is a hybrid program in any large organization, requiring complex

cooperation and integration between the taxation team (that files the actual tax claims),

the Finance and Accounting teams (which control all of the accounting and reporting

functions), and the technology, systems, engineering and product development areas, for

example, where all of the eligible technical work, and the assessment functions, properly

This document is the property of Bruce Madole, CMC, and is used by permission. All rights are reserved. The opinions expressed herein are personal, created for entertainment
and information purposes, and are not intended to be relied on in place of professional counsel or advice. No part of this document may be re-used, transmitted or re-transmitted
without the express prior written consent of the author, who can be contacted at: brucemadole@sympatico.ca
Copyright 2010 – Bruce Madole, CMC Let the games begin

reside. And then there’s the Human Resources area, which typically serves as a

“gatekeeper” to preserve control of anything the HR folks see as belonging in their

domain, such information about employee salaries, qualifications, privacy, etc. Locate

the SR&ED program in any one of these domains, and a smart political operator can

make some kind of a case for locating it elsewhere, under his or her own control.

SR&ED is too frequently seen as an “orphan” within any of these specific domains

(particularly in the immature stages) lacking a proper parent to say “this child is mine” –

i.e., that there are good and sufficient strategic reasons to be involved in raising and

nurturing it – which makes the SR&ED program surprisingly easy to uproot and relocate.

All too often, those responsible for SR&ED don’t really know what to do with it,

and feel uncomfortable about the alignment between a SR&ED team and their core

mission.

That is, until the real money starts to flow.

Once a SR&ED team reaches a level of meaningful financial return, it becomes a

pawn for the political games.

Be warned, however. There is one vital stakeholder that is almost always

overlooked in these games-playing scenarios, because that stakeholder is external to

every claimant: the Canada Revenue Agency (CRA), which is responsible for assessing

every claim made. The CRA is very clear in its preferences – they want to see a

claimant’s SR&ED function located within the technology area for any claimant. This is

because the “science” aspects of the claim are required to drive every other aspect of it,

This document is the property of Bruce Madole, CMC, and is used by permission. All rights are reserved. The opinions expressed herein are personal, created for entertainment
and information purposes, and are not intended to be relied on in place of professional counsel or advice. No part of this document may be re-used, transmitted or re-transmitted
without the express prior written consent of the author, who can be contacted at: brucemadole@sympatico.ca
Copyright 2010 – Bruce Madole, CMC Let the games begin

and the determination of eligible activity needs to be led by the people who do the

technical work, and who understand the nature of the technological uncertainties.

Any organization that does not locate SR&ED within its technical domains will

be subject to higher levels of mistrust and scrutiny from CRA Science Reviewers, based

on the CRA’s fundamental suspicion that financial or taxation teams leading a SR&ED

effort will inevitably over-claim because they lack the foundational technical knowledge

to discriminate between the eligible and ineligible.

It should be understood, therefore, that any move to reposition SR&ED outside

the technical domains of a company is inherently risky, and potentially damaging to the

perception and effectiveness of the program itself.

Will this knowledge alter the behaviour of the corporate games players? Probably

not. But it may be food for thought.

So … let the games begin.

-30-

This document is the property of Bruce Madole, CMC, and is used by permission. All rights are reserved. The opinions expressed herein are personal, created for entertainment
and information purposes, and are not intended to be relied on in place of professional counsel or advice. No part of this document may be re-used, transmitted or re-transmitted
without the express prior written consent of the author, who can be contacted at: brucemadole@sympatico.ca