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On September 18, 2013, the CRA released a number of specific examples onto their website to help illustrate SR&ED eligibility. This is part of their Policy Review project, which officially concluded in December 2012. Are these examples useful? Read on to find out!
SR&ED Eligibility Policy
One of the most significant updates which occurred as part of the Policy Review was the updated “Eligibility of Work for SR&ED Investment Tax Credits Policy“. In this, they condensed dozens of industry-specific papers and many court case rulings into a single document that explains what activities are eligible for SR&ED, and which are not. Because the document is designed to apply to all applicable industries (ranging from dentistry to mining to oenology), the policies are not overly specific; this is problematic, as a request for specific examples is one of the most asked questions at the CRA’s free information seminars.
The examples can all be found on the CRA website.
The first thing that should be noted about this page is the large disclaimer at the top:
- These examples are intended to illustrate specific concepts found in the Eligibility of Work for SR&ED Investment Tax Credits Policy. The field of work described is not an issue, nor whether the work is actually eligible.
This reminds the reader that even if a company is performing similar work to one of the examples, these do not guarantee eligibility.
The examples that follow are a mix of different scenarios which could theoretically apply in modern Canadian companies. We are happy to see that a wide selection of different industries are represented, though there is one glaring omission: There is only a single example that is tangentially related to software development. As software claims are becoming more and more prevalent—and often create a large amount of uncertainty with SR&ED due to open-source availability and claims of ‘routine engineering’—we hope that the CRA will expand this category with more examples in the future.
All examples are fairly clear, and counter-examples are also provided in a number of cases which would disallow activities if some criteria were met. There aren’t any overly surprising examples, and most are fairly self-evident. The most interesting one, in the author’s opinion, is Example #2 which relates to the following:
- This example shows that technological uncertainties may arise from limitations in current technology, and technological uncertainty exists when it is not known whether a given result or objective can be achieved or how to achieve it based on generally available scientific or technological knowledge or experience.
As many claimants are not aware of the second criteria (that the work can be achieved, but not necessarily how to achieve it), we are very glad that the CRA is emphasizing this point clearly.
These initial examples are simply draft examples, and the CRA is currently looking for direct feedback as to the accuracy and usefulness of what they’ve presented. Feedback is welcomed from both established companies as well as small entrepreneurs who are curious about the program. The response form can be found on the CRA website.