Framing Gaps in SR&ED Disputes Shift Control to CRA

Key Takeaways

1. Framing gap: The Tax Court accepted CRA’s framing because Vortex’s reply lacked engineering support and legal positioning. In other disputes, when claims were framed with qualified technical input and decision-grade evidence, CRA challenges often lost force. That framing was absent here.

2. Process records: The claim did not fail due to a lack of innovation, but rather due to a lack of documentation. Where hypotheses, testing, and iteration were recorded, courts treated the work as a credible advancement. None of that process evidence appeared in this case.

3. Reconstruction absent: Vortex described a meaningful effort, but failed to link activities to advancement through verifiable records. In disputes where businesses and counsel reconstructed gaps with coherence, the Tax Court judges were more willing to treat the claims as credible. Here, the gap deepened the evidentiary holes and left CRA’s framing intact.

The Situation

Vortex Energy Services Ltd. developed mobile water heaters for oilfield fracking and claimed more than $1.9 million in SR&ED expenditures over two years. The CRA rejected the claims, finding the work routine.

The Tax Court upheld the reassessments and dismissed the appeals.

What Made the Difference

The CRA advanced a structured, evidence-based narrative; Vortex did not.

CRA characterized the work as routine engineering and supported that framing with targeted information requests and analysis of technical uncertainty. Vortex countered with general assertions of innovation and oral testimony from a shareholder, but no expert input or structured records.

Lacking the framing and evidence needed to displace CRA’s version, the Tax Court sided with CRA. The decisive gap was one of positioning and evidence, not technical.

The Signal for Business Leaders

In SR&ED disputes, records are almost never complete. Left unaddressed, those gaps allow CRA’s framing to harden into fact,  often converting millions in SR&ED claimed into routine expense.

The businesses that shifted outcomes were not those with flawless documentation, but those whose counsel reconstructed the missing story with coherence and discipline. Tax Court judges often reward skillful framing and reconstruction, and punish their absence. 

The pattern is clear: many SR&ED disputes do not fail due to a lack of innovation; they fail because few can credibly fill the gap that the records leave out. In these cases, judgment in framing and discipline in reconstruction matter even more.

Case reference: Vortex Energy Services Ltd. v. HMK, 2025 TCC 63