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 it’s 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 July 12, 1996 the Canada Revenue Agency (CRA) published a guide to clarify its position in regards to the application of the rules for third party payments for SR&ED.
SR&ED Rules and Definitions
Within the framework of the policy, the CRA states that the following types of payments can be considered as third party payments:
- “an approved association that undertakes SR&ED;
- an approved university, college, research institute or other similar institution;
- a corporation resident in Canada and exempt from tax under paragraph 149(1)(j);
- an approved organization that makes payments to an association, institution or corporation.” (1)
Any payments made to the above third parties are eligible if the SR&ED is carried out in Canada and the taxpayer that claims the amounts is the recipient of the results of that SR&ED. If any third party payments are used for purposes other than SR&ED, they cannot be used for claim purposes.
Types of Payments and Providing Proof for SR&ED
In all cases where payments are made to third parties for SR&ED purposes, it is crucial for the claimant to ensure they can provide evidence of the payments including the following information:
- “To whom and for what the payments were and the amount of the payments.
- The payments were made for SR&ED in Canada.
- The SR&ED is related to the taxpayer’s business.
- The taxpayer is entitled to exploit the results of the SR&ED” (2).
Such payments could include direct financial contributions or student funding, as examples. View the complete policy here.
(1-2) Lifted 10/15/2012 http://www.cra-arc.gc.ca/txcrdt/sred-rsde/pblctns/sr9604-eng.html