Lines 202/204: Establishing Your SR&ED Project Dates

Updated to Reflect New Policies (2022) 

*** Some of the policies referenced were updated 2021-08-13. This article has been updated and is accurate as of 2022. *** 

When filling out the Canada Revenue Agency’s Scientific Research & Experimental Development (SR&ED) application form, you’ll note that you must enter both the beginning and end dates of your project. This information will be input at Line 202 and Line 204, respectively. While this may seem relatively easy, the CRA requires that you identify when your own project’s eligibility for work stopped. This compels you to take a step back to look at your own project in order to accurately describe its timeline. It is essential to focus on accuracy and thus save yourself from being dinged with an audit over a simple mistake about your timeline.

Background

Your SR&ED application requires a technical narrative. In Line 202 and Line 204, you contextualize your narrative by setting up the duration of your SR&ED project.

The CRA reviewer will be inspecting these lines as they evaluate the duration of your project for any potential warning signs that your SR&ED application is worthy of an audit. For example, if your Line 202 and Line 204 coincide with the tax year, this may become a red flag suggesting that your claimed project is routine work and company projects doctored to fit the parameters of the SR&ED program.

Reminder: you should never falsify the dates on your SR&ED submission! ¹ For example, if your claimed project does actually end at the end of your tax year, do not claim it ended earlier or sooner. First, because you will lose out on eligible expenditures. Second, if you are selected for review, a falsified date can cause a loss of credibility with reviewers. It goes without saying that extending the project dates is also not advised.

Line 202 – When your SR&ED project enters the world

Line 202 is where you enter the time when you first identified “scientific or technological uncertainties” and “the work to resolve those uncertainties commences.” ² When you first exhausted the available knowledge and public knowledge base and realized that there was no knowledge in the public domain to find a solution and you begin working to generate the missing knowledge, that is when your SR&ED project starts. Remember the CRA’s definition of scientific or technological uncertainty:

Scientific or technological uncertainty means whether a given result or objective can be achieved, or how to achieve it, is unknown or uncertain due to an insufficiency of scientific or technological knowledge. ³

Note that the date you first encountered the technological or scientific uncertainty should not be different than the date at which you began to work to resolve the uncertainty. You’ll note that Line 202 in the SR&ED application form requires you to enter one month of the year as the project start date, so there is some flexibility if there is a small delay between the identification of the uncertainty and the start of work to resolve the uncertainty. ⁴

Thus, Line 202 should only be one single month.

A tip for your SR&ED: As soon as you encounter that uncertainty and realize you have no available solution, use your phone to take a picture with a timestamp! An image with a labelled date provides strong support to clear records.

Line 204 – When your SR&ED project is finally complete

Line 204 is the date on which your SR&ED project was completed. The most important thing to understand about Line 204 is that it is the time at which “the eligibility of the work also ceases”.⁵ Many applicants have made grave mistakes regarding Line 204 that cost them.⁶ 

To properly identify your project’s completion date (and avoid uncomfortable questions during an audit), you will want to consider some key features. A completion date will be one (or more) of the following:

• The time at which you achieved “scientific or technological advancement by resolving the associated uncertainties”.⁷ Did you ever have a “Eureka!” moment during your SR&ED project? That was likely a moment of overcoming uncertainty (for a definition of uncertainty, refer to the previous mention earlier in this article). Scientific or technological advancement is the “generation or discovery of knowledge that advances the understanding of science or technology.”⁸ We take a closer look at the term “scientific or technological advancement” in this article.
• The time at which it was “determined that the scientific or technological uncertainties cannot be resolved.”⁹ This is not as simple as a moment of giving up and closing up shop. Remember, “success or failure in meeting your objectives is not relevant when assessing whether your work meets the “Why” requirement“.¹⁰ Therefore, the time at which your hypothesis was rejected would be the date you enter into Line 204.
• The time at which you “terminated the project for any reason.”¹¹

But wait! There are some exceptions…

• If your project is not yet completed at the end of the tax year, then you will simply “enter the expected completion date.” ¹² It is completely normal for SR&ED projects to extend their deadlines. After all, you are dealing with an uncertainty!
• If your project has temporarily stopped, but will be resumed, simply enter the date on which it is expected to be completed.¹³ If you are unsure when your project will resume, then just write the date at which the project temporarily stopped.¹⁴

SR&ED Project Dates  – Critical But Often Ignored

Line 202 and Line 204 may seem simple enough; however, it’s important to carefully consider these data points when looking at your overall documentation. Can you justify these dates? Line 202 and Line 204 ask you to look at your technical narrative from a broader perspective, which may encourage you to improve your record-keeping. Better records will help you when preparing your T661. Confidence in the start & end dates will allow you to provide a strong defence to your SR&ED claim.

Have you ever made any painful mistakes with Lines 202 and 204? Do you have any hindsight?

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