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Third Party Payments for SR&ED (1996)

Third Party Payments for SR&ED (1996)

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:

  1. “To whom and for what the payments were and the amount of the payments.
  2. The payments were made for SR&ED in Canada.
  3. The SR&ED is related to the taxpayer’s business.
  4. 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

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