ArchiveForms (No Longer Active)HistoryPress Releases

Application Policy: Third-Party SR&ED Payments (1996)

Reference Article (>5 Years Old)
Please note that the information herein may be outdated, links could be inactive, and policies discussed may have evolved. For the most current data, consult our latest publications. If you would like us to refresh this article as it is of interest to you, please contact us.

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 July 12, 1996, the Federal government issued a notice concerning payments to third parties for SR&ED. The notice was intended to address questions such as how basic research qualifies, how to separate SR&ED in multidisciplinary research, and the documentation required for taxation purposes.

Third-Party Payments for SR&ED

As defined for taxation purposes, third-party payments qualify in these categories:

  • Associations;
  • Universities, colleges, and research institutes;
  • Corporations resident in Canada; and
  • An “approved organization” that makes payments to the above entities.

“The SR&ED must be related to a business of the taxpayer, and the taxpayer must be entitled to exploit the results of that SR&ED,” the notice stated. “Third-party payments should not be payments that can be used for purposes other than SR&ED.”

Documentation is also required to show who the payments were for, how much they were, and proving that they are related to SR&ED and the business of the claimant.

SR&ED Clarifications

The government also provided some clarifications on other terms:

  • Related to a business: “Some interconnection or link between the SR&ED work and the general area of a taxpayer’s business.”
  • Entitlement to exploit: “The taxpayer must have gained the right to use the results of the SR&ED in his business as a direct result of the payment.”
  • Basic research: “Related to a business if the outcome could have a direct and beneficial application to a taxpayer’s business. In other words, there must be the potential to gain knowledge from the SR&ED.”
  • Boundaries of SR&ED: “Any payment made by the taxpayer must be for the purposes of SR&ED.”

This article is based upon a Government of Canada notice issued at the time: Application Policy: Payments to Third Parties for SR&ED.


Do you have questions about SR&ED history, or current trends?

Connect With Us! 

Share your thoughts by commenting below or joining the conversation on our LinkedIn page, Facebook page, or via Twitter. 

Leave a Reply