The CRA is in the process of revamping and clarifying the rules for SR&ED eligibility. It periodically releases draft policy documents for a period of 45 days, during which the public can provide feedback. Today, the CRA released three different documents, all relating to the following topics. A more in-depth commentary on the drafts, as well as a copy of our official feedback to the CRA will be posted in the upcoming weeks.
This policy update clarifies the CRA’s position on what can be claimed for the SR&ED tax incentive when attempting to commercialize an asset or technology. It specifically addresses how pilot plants and prototypes are treated. Our initial impression is that this is a welcome document which clearly lays out guidelines for addressing companies which are in the process of transitioning from R&D to commercialization projects.
The second policy update is related to the Asset Commercialization document, but differs in that it focuses on mass production processes. This is a common grey area for SR&ED claimants, in that it is often difficult to determine when a given production run is ‘finished’ enough for commercial production. The document outlines a series of questions to consider when determining whether or not a given trial is eligible for SR&ED. A more in depth analysis will follow.
Materials for SR&ED
The last policy document relates to material costs and how to claim them for SR&ED. Most of the information in this document has been stated before in existing publications, but it does provide a slough of interesting examples to help guide the claimant. Of particular note is the discussion related to energy/water as a claimable material, as well as the distinction between materials consumed and materials transformed.
What are your thoughts on the draft policies? How do you feel they line up when combined with the draft SR&ED tax incentive eligibility documents? What would you like to see?
This article is presented only for informational purposes and does not constitute legal advice. You should retain legal counsel if you require legal advice regarding your individual situation.