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.