For businesses claiming the Scientific Research & Experimental Development (SR&ED) investment tax credit, a new federal tax measure needs to be considered to maximize this tax credit.
Canada Emergency Wage Subsidy (CEWS)
In response to the COVID-19 pandemic, the Canada Emergency Wage Subsidy (CEWS) is one of the federal government's financial support programs to Canadian businesses. The purpose of CEWS is to help eligible employers keep or rehire employees. However, how does the CEWS affect SR&ED claims?
In CRA's Guidance issued on February 19, 2021, the Department of Finance Canada has indicated that assistance received under the CEWS reduces the amount of remuneration expenses eligible for other federal tax credits calculated on the same remuneration.
Example of Eligible R&D
- Assembly line improvements
- New or improved production techniques to increase production speed
- Development of physical or virtual prototypes
- Research into chemical compatibility and formulation changes
- Improved building materials, devices, instruments, tools, or products
- Attempts to overcome limitations on technology or unexpected technological problems
- Technology combinations that are unique to your company or your industry
- Design conceptualization, energy efficient construction, or improving building performance
- Improved manufacturing processes to enhance shelf life or product stability, reducing the risk of spoilage, waste, and contamination
- Clinical trials, experiments, or analysis to solve problems or advance scientific knowledge
What Expenditures Qualify for SR&ED Tax Credits
- Salaries or wages
- Materials
- Canadian Subcontractors
- Overhead
- Third-party payments
These types of expenditures can be claimed, if they are directly related to your SR&ED work.
How do I Apply for SR&ED Tax Credits?
You must file the prescribed forms within 18 months from the end of the tax year in which the expenditures were incurred. Crowe MacKay encourages you to file these forms along with your corporate income tax return within its normal filing deadline, typically six months after fiscal year end.
Preparing your SR&ED Claim
Crowe MacKay's specialists understand the SR&ED claim process and what qualifies. Our professionals have the expertise to assist you in:
- preparing your claim or assisting you to satisfy CRA's strict guidelines and standards;
- providing training to your team on how to identify eligible activities and projects;
- defending your claim during any CRA reviews.
With our team's high quality work and prompt responses, we are committed to making smart decisions for your business that will result in lasting value.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
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