Government and Non-Government Assistance Within the SR&ED Program (2005)
At SREDucation, we’re taking the time to document all of the changes that have occurred to the SR&ED program over the years. In our “From the Archives” series, you’ll be able to see how the program has evolved since its inception in 1986.
NOTE: This application policy supersedes the one published in 2000 called Government Assistance – Treatment of Provincial and Territorial R&D Assistance.
On October 28, 2005, the Canada Revenue Agency (CRA) published a supplemental guide to assist claimants in clarifying the rules in relation to government and non-government assistance as well as the impact of each type of assistance on the expenditure pool.
SR&ED Legislation and Definitions
In policy SR&ED 2005-02, the CRA clarifies its position relating to government and non-government assistance within the SR&ED legislation, specifically “the SR&ED deductible expenditure pool and qualified expenditures is contained in paragraphs 37 (1)(d) and (d.1), subsections 127(9) definition of ‘government assistance’, and ‘non-government assistance’, and 127(18) to (24) of the Income Tax Act (the “Act”).” (1) The policy details the specific definitions of what constitute both government and non-government assistance as well as which provinces currently offer provincial SR&ED assistance.
Applying the Rules
So, what does that mean for the taxpayer? Basically, any amount that is received as government or non-government assistance will reduce the SR&ED expenditure pool, but on an individual project basis. In other words, the assistance received for a particular project cannot be carried over to another project and will be the lesser of:
- “the total of all amounts of assistance in respect of the SR&ED that, at the claimant’s filing due date for the year, the claimant has received, is entitled to receive, or can reasonably be expected to receive less any amounts of assistance applied in preceding tax years; and
- the total project costs related to that project for the year.” (2)
In no cases can the expenditures be reduced to a negative amount. For further clarification on the impact of government and non-government assistance on the SR&ED claim process, follow the link here.