5 Steps to Write Your SR&ED Technical Narrative

Re-evaluate how you collate your SR&ED information by using a 5 steps guide to write your technical narrative.

One of the main questions we’re asked is how to complete the T661 Technical Narrative. Over the years, we’ve found that it doesn’t always make sense to follow the standard technical narrative format as structured by the CRA in the T661. We find it is easier to write out the ideas in a linked fashion, then insert them back into the document in the correct section.

Much like structuring a novel, there are many methods to writing your technical narrative, such as the Snowflake Model (designed by a software architect) used to help organize the information prior to drafting a final version. While this post references CRA SR&ED forms (including the T4088 ¹ and Eligibility of Work policy ²) we deliberately do not follow the T661 ³ format.

How Do I Write My Technical Narrative? 5 Steps Tool

We’ve created a 5 steps solution to writing your SR&ED technical narrative on your T661 ⁴ form.

1. Why are you undertaking this R&D venture?

Indicate the overall objective of the project. This can also be completed using the project title. Be sure to reference the technological objective. A good comparison of a company’s internal name for a project vs. an SR&ED project name can be found here. This objective can be fairly broad and not focus too much on specific details, but it should frame the rest of the project i.e. Why are you undertaking this R&D venture?

2. Specify Technological Objectives

Describe the scientific or technological uncertainty you encountered that led you to do the SR&ED. ⁵

What were the specific technological objectives/milestones of this project? Be sure that you have clearly defined, quantifiable objectives against which you can measure your success.

Note: We often use groups of three when describing the objectives. Often one technological objective will be more critical; however, there will be supporting requirements. If you need more, be sure to include them.

3. Specify Limitations in Technology and/or Knowledge Base – the Uncertainties

The current Eligibility of Work for SR&ED Investment Tax Credits Policy states:⁶

Technological uncertainties may arise from shortcomings or limitations of the current state of technology that prevent a new or improved capability from being developed. In other words, the current state of technology may be insufficient to resolve a problem.

What is a “technological uncertainty”? The CRA defines technological uncertainty in their glossary as:⁷

Scientific or technological uncertainty means whether a given result or objective can be achieved or how to achieve it, is not known or determined on the basis of generally available scientific or technological knowledge or experience.

Thus, we must also define what our knowledge base is in regards to the technology. This is defined as:⁸

Scientific or technological knowledge base refers to the existing level of technology and scientific knowledge, and consists of the knowledge of the resources within the company and sources available publicly.

The resources within the company include:

technical knowledge, education, training, and experience of its personnel; and

its technical capabilities typified by its current products, techniques, practices, and methodologies (for example, trade secrets and intellectual property).

Publicly available sources generally include scientific papers, journals, textbooks, and internet-based information sources as well as expertise accessible to the company (for example, through recruiting employees or hiring consultants or contractors). The company is expected to have information that is common knowledge at the time the work is performed. Common knowledge is knowledge available to professionals familiar with the specific areas of science or technology in question.

It is recognized that, although the knowledge available publicly is the same for all companies, the scientific or technological knowledge base may vary from company to company because the internal resources can vary from company to company.

What prevented you from easily meeting your objectives? This can include software architecture limitations, hardware limitations, a lack of documentation from the original developers (including a lack of access to non-proprietary documentation), no research papers in this area, etc.

Financial limitations can be a factor, but they should never be the primary driver of an SR&ED claim. Focus on the technological shortcomings of what exists.

Note: This is the most difficult section in SR&ED and where most claims fail! You must show that you had established a technological baseline and that standard practice would not be sufficient in overcoming these obstacles. 

4. Specify the Work Performed

The T4088 suggests the following:⁹

Describe the work done in chronological order. In doing so, clearly demonstrate the systematic nature of the investigation or search. This includes describing;

• the hypotheses designed to reduce or eliminate the uncertainties;
• experiments and/or analysis conducted to test the hypotheses;
• the results obtained; and,
• the conclusions.

In order to determine if SR&ED work was performed, the Eligibility of Work for SR&ED Investment Tax Credits Policy describes the required methodology:

The method to establish [whether SR&ED was performed] involves answering the following five questions:

1. Was there a scientific or a technological uncertainty?
2. Did the effort involve formulating hypotheses specifically aimed at reducing or eliminating that uncertainty?
3. Was the overall approach adopted consistent with a systematic investigation or search, including formulating and testing the hypotheses by means of experiment or analysis?
4. Was the overall approach undertaken for the purpose of achieving a scientific or a technological advancement?
5. Was a record of the hypotheses tested and the results kept as the work progressed?

Outline the work which was performed to overcome technological obstacles. Include descriptions of what did/did not work and show how they link to the objectives and obstacles. As well, clearly demonstrate the systematic nature of your approach and quantify the results wherever possible.

5. Specify the Technological Advancements

Describe the new scientific knowledge you gained or the technological advancements you achieved, or attempt to achieve, as a result of the SR&ED work you performed.¹⁰

To supplement the T4088, the Eligibility of Work for SR&ED Investment Tax Credits Policy defines technological advancements as:¹¹

[…] the generation of information or the discovery of knowledge that advances the understanding of scientific relations or technology […] the new knowledge could be useful to other situations or circumstances beyond the current project in which the advance was made.

From your base level, what advances to the technology occurred during the reporting period? Compare them to the technology base level at the start of the period. Was there an improvement? If so, by how much? Please note that incremental improvements are still eligible. What did you learn as a result of your success or failure to meet the objectives?

Explain the following:

(a) Why the new capability represents a technological advancement in terms of the underlying technology,

(b) What knowledge you gained as a result of the work you did, regardless of success or failure

Specifically, describe “the information or the knowledge generated that advanced your understanding of scientific relations or technology.”¹²

Combining the Information

Once all of these have been completed using quantifiable metrics it is time to insert them into the correct order under the correct lines in the T661 form:

• Line 242 – Insert answer from questions 1-3. Wordcount requirements: 350 words / 50 lines.
• Line 244 – Insert answer from question 4. Wordcount requirements: 350 words / 50 lines.
• Line 246 – Insert answer from question 5. Wordcount requirements: 350 words / 50 lines.

For all other sections of the T661, including the title and qualification, please read through our other articles.

One Size Does Not Fit All

While the above 5 steps tool is one approach you can take to complete your T661 technical narrative, the most important thing is to do whatever works for you. If there is another way of collecting information that makes more sense for your SR&ED project, then use it!

Translating your information into the T661 form should always come last, however, ensure you fully understand the forms before you begin. Remember there are strict word limits so ensure you give yourself enough time before the deadline to complete the form in its entirety.