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If CRA loses your SR&ED filing, what happens next?

That issue came up in FOOi Inc. v. The King, 2023 TCC 176. The case shows a simple but important point. In tax procedure, timing and routing matter a lot. Even when a taxpayer acts in good faith, the rules still control.

I’m Amandeep Singh from Cloudiverse CPAs in Burnaby. In this post, I explain what happened in this case, why the taxpayer lost, and what business owners should do to protect their SR&ED claims.

What happened in FOOi Inc. v. The King?

FOOi Inc. was a Canadian-controlled private corporation with a June 30 year end.

Here is the timeline:

• The company filed its 2018 T2 return on December 5, 2019
• The return did not include the SR&ED schedules
• CRA issued a Notice of Assessment on December 11, 2019
• The accountants mailed the SR&ED package on December 20, 2019
• Later, CRA said it could not find that package
• Then, on January 21, 2021, the accountants sent a duplicate package to CRA’s SR&ED Division in Toronto
• After that, CRA replied that the filing was outside the SR&ED deadline
• Next, the company filed a formal Notice of Objection on April 9, 2021
• Finally, the company asked the Tax Court for more time to object

However, the Tax Court dismissed the application.

Why did this SR&ED case matter?

This case mattered because almost $200,000 of refundable SR&ED credits was at stake. More importantly, the case dealt with three technical issues:

• whether an SR&ED package can count as a Notice of Objection
• whether a later letter can count as an extension request
• whether a nil assessment can be challenged in the usual way

Therefore, the case is useful for founders, CFOs, controllers, and tax advisors.

Is an SR&ED filing the same as a Notice of Objection?

No. The Court drew a clear line between the two.

An SR&ED filing asks CRA to process a claim. In contrast, a Notice of Objection challenges an assessment under the Income Tax Act.

As a result, sending the T661 and related forms did not, by itself, create a valid objection.

That point was central in FOOi. The December 20, 2019 package may have been mailed, and the Court accepted that evidence. Even so, the package was still an SR&ED claim package. It was not a formal objection.

Where should a Notice of Objection be sent?

A Notice of Objection should be sent to the Chief of Appeals.

Under subsection 165(2) of the Income Tax Act, the objection must be addressed to the Chief of Appeals and delivered or mailed to the proper CRA Appeals channel.

This point was very important in FOOi. The January 21, 2021 letter went to theSR&ED Division, not to Appeals. Therefore, the Court did not treat that letter as a valid objection.

In simple terms, the right document must go to the right CRA function.

What is the role of the Chief of Appeals?

The Chief of Appeals is the statutory intake point for the objection process.

Once CRA issues an assessment, the Appeals Division handles formal objections. If a taxpayer files a valid objection, the Minister must reconsider the assessment. After that, CRA may confirm, vary, or reassess.

In this case, the Chief of Appeals mattered because:

• a Notice of Objection had to be addressed there
• an extension request also had to be addressed there
• the taxpayer sent its January 2021 letter to SR&ED instead

Accordingly, the taxpayer missed the proper procedural route.

What is the 90-day objection deadline?

For a corporation, the normal objection deadline is usually 90 days from the date CRA sends the Notice of Assessment.

In FOOi:

• CRA sent the Notice of Assessment on December 11, 2019
• Therefore, the normal objection period ran for 90 days from that date

This deadline comes from subsection 165(1) of the Income Tax Act.

So, once the 90 days passed, the company needed to use the extension process.

What is the 12-month extension period?

This rule often causes confusion. There are actually two different 12-month concepts in SR&ED files.

1. The objection extension period

If the 90-day objection deadline is missed, a taxpayer may ask the Minister for more time. That request must usually be made within one year after the 90-day objection period ends.

This rule comes fromsection 166.1of the Income Tax Act.

So, in practical terms, the outside limit is often described as:

• 90 days from the assessment date
• plus one more year to ask for an extension

That is why many advisors say “one year and 90 days.”

2. The SR&ED filing deadline

This is a separate rule.

Under subsection 37(11) of the Income Tax Act, the prescribed SR&ED form must be filed within12 months after the taxpayer’s filing due date for the year.

For many corporations, that often works out to about 18 months after year end, because the T2 filing due date is generally six months after year end.

Therefore, the SR&ED filing deadline and the objection extension deadline are different rules with different purposes.

Why did FOOi lose the case?

The taxpayer lost for procedural reasons.

First, the December 20, 2019 SR&ED package was not a Notice of Objection.

Second, the January 21, 2021 letter was sent to the SR&ED Division rather than the Chief of Appeals.

Third, that letter read like a resubmission of the SR&ED claim. It did not clearly say that it was:

• a Notice of Objection
• an application for extension of time
• or both

As a result, the Court found that the statutory requirements were not met.

What is a nil assessment, and why did it matter?

A nil assessment is an assessment that shows no tax payable.

In FOOi, the original assessment was a nil assessment. That added another layer of complexity. The Court noted that a nil assessment may limit the normal objection route because there is no assessed tax owing to dispute in the usual sense.

Therefore, the taxpayer faced both a filing issue and a procedural issue.

Practical lessons for SR&ED claimants

This case gives several practical lessons.

File SR&ED forms as early as possible

Whenever possible, file the T661 and related schedules with the original T2 return. That approach reduces risk.

Keep proof of filing

Use tracked delivery. Also keep scans of the full package, courier records, and internal notes.

Track two separate deadlines

You should track:

• the SR&ED filing deadline under subsection 37(11)
• the objection deadline under subsection 165
• the extension deadline under section 166.1

Send objections to Appeals

If you want to object, send the document to the Chief of Appeals. Also use clear wording.

For example, label the document:

• Notice of Objection
• Application for Extension of Time to Object

Keep a full CRA contact log

Record dates, names, case numbers, and copies of letters. That record can help if CRA later says it cannot locate a filing.

Why this case matters for business owners

This case is about more than SR&ED. It is also about tax procedure.

The Court accepted that the accountants mailed the original SR&ED package. The Court also recognized the difficulty of dealing with CRA during the early COVID period. Even so, the statutory deadlines still applied.

Therefore, this case is a strong reminder that good facts alone do not fix a missed procedural step.

Final takeaway

FOOi Inc. v. The King shows that an SR&ED claim and a Notice of Objection are two different things. It also shows that the Chief of Appeals plays a key role in the objection process. Most importantly, it confirms that the 90-day objection deadline and the separate 12-month extension period must be tracked carefully.

If your company claims SR&ED, strong filing controls can protect both your credits and your cash flow.

Disclaimer
This post is for general information only and is not legal, tax, or accounting advice. Professional advice should be obtained before acting on any matter discussed here.

Call to Action
If you want a review of your SR&ED timelines, CRA correspondence, or objection process, please reach out for our SR&ED services.