SR&ED


Liberals Drop a SR&ED Surprise

On March 19, the Liberal government announced the details of the 2019 Federal budget. One of the big surprises in the budget was the announcement that the program will be enhanced for CCPC going forward. Buried in the various innovation announcements, the government announced a change to the rules around accessing the 35% enhanced ITC rate for SR&ED. For fiscal years ending after March 31, 2019, the enhanced rate will be accessible to all CCPC regardless of taxable income, but still subject to taxable capital rules. This change is specifically aimed at growing Canadian companies who have exceeded the $800,000 taxable income threshold which previously eliminated access to the enhanced ITC rate. Now companies can continue to scale up their companies without handicapping their ability to generate a profit. This initiative by the government is welcome, as it puts Canadian companies in a stronger position to compete globally and incentivize […]


Subcontractors and SR&ED ‘Loopholes’

Subcontractors who are Canadian (i.e. companies operating in Canada), or individuals in Canada hired on a subcontract basis and are performing SR&ED eligible work, can be claimed under the program. The difference between subcontractors and employees is simply the refund rate. Through the program, a higher return rate is applied to salaried employees versus subcontractors. There is another scenario involving subcontractors that people mistakenly think is a loophole to be exploited. In some cases, a company will hire a Canadian subcontractor (typically a company) to perform some SR&ED eligible development on their behalf. The Canadian subcontractor then outsources this work offshore. Some outsourcing companies present this as a way to win business as they can lower their costs to the client, while still allowing the client to claim SR&ED on their work. In fact, this is not a loophole, and is something that the CRA accounted for long ago. Through a directive, that […]


SR&ED and Due Diligence

In today’s blog post, we’ll look at the misunderstood role of due diligence and how it pertains to SR&ED. Due diligence is a critical component of the ‘Technological Uncertainty’ which is one of the three main criteria of the program. In order to establish that a technological uncertainty exists, an organization must perform some due diligence to determine if the uncertainty is readily solvable using available knowledge, or if no information exists. Without performing this critical step, it is not possible to establish a valid technological uncertainty. There are two main misconceptions we see regarding due diligence and SR&ED. First, due diligence is a required component of the program, however the time spent in performing this task is not eligible. The reason for this is that you must establish that a technological uncertainty exists before you can begin your systematic investigation and/or experimental development and your due diligence precedes the establishment […]