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The Minister of Finance Proposes Changes to the Income Tax Act (2005)

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Updates to SR&ED Program

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. For a timeline of these events, check out the SR&ED Tax Credit page on Facebook. Stay current with the program by understanding the historical context. 

On November 17, 2005, then Minister of Finance Ralph Goodale proposed amendments to the Income Tax Act in order to limit the amount claimed for a SR&ED project to a maximum of the actual amount disbursed by the taxpayer.  This amendment ensured that “no expenditure will be considered to have been made by a taxpayer except to the extent of an actual outlay or expense incurred by the taxpayer.” 1

Tax Court Ruling re: SR&ED

The changes tabled by Minister Goodale were to respond in part to a February 2005 Tax Court of Canada ruling regarding a case where shares had been issued under a stock option plan.  The amount paid by the employee was less than the value of the actual shares as part of an employee benefit.  “(T)he Court allowed the corporation to treat the difference as a scientific research and experimental development (SR&ED) expenditure qualifying for SR&ED tax credits”. 1

Other Changes 

Within this amendment to the Income Tax Act were also included the following:

  • (…) “no expenditure arises solely by virtue of a taxpayer granting an option to acquire an interest in itself.”
  • (…) “there will be no exception to the 12-month filing deadline for applications for investment tax credits and SR&ED treatment” 1

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