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SR&ED: Subcontract vs. T4 Labour

In working with our clients we frequently encounter confusion regarding the ramifications of utilizing contract labour versus salaried labour to conduct SR&ED work. The decision to structure the relationship between an employer and potential employee or contractor needs to be examined not only for general business implications but also for specific SR&ED implications as it can have a significant impact on a company’s eligible SR&ED expenditures for ITC (investment tax credit) purposes. A common misconception is that the financial advantages of employing contract labour make this a preferred arrangement. The financial advantages of contract labour include minimizing the employers EI and CPP burden as well as reducing costs associated with various employer funded employee benefit programs. These advantages quickly disappear in the context of a firm conducting SR&ED. This is best illustrated with a simple example. Let’s compare the two situations where the company in question is a CCPC in […]