CRA Updates to Select SR&ED Program Policies – April 28, 2022

The changes detailed within Appendix B.1 Explanation of changes are as follows:

Updates to SR&ED Investment Tax Credit Policy

The SR&ED Investment Tax Credit Policy revision overview states:

For tax years ending after March 18, 2019, the use of previous year taxable income is removed as a factor in determining a Canadian-controlled private corporation’s annual expenditure limit (section 3.1.1) for the purpose of the refundable enhanced scientific research and experimental development (SR&ED) investment tax credit.

All references to capital expenditures and the basic investment tax credit rate of 20% have been removed, as these no longer apply after 2013.

The text of this document has been revised to reflect these changes, see Appendix C.1 Explanation of changes.⁵

The changes detailed within Appendix C.1 Explanation of changes are as follows:

Throughout the document the reference to the basic ITC rate of 20% for tax years ending before 2014, and the reference that for tax years that include January 1, 2014, the reduction in the basic ITC rate is pro-rated based on the number of days in the tax year that are after 2013, have been removed. These were previously found in sections 1.1, 2.1, 2.2.1, 4.0, 4.1, and Appendix A.

Section 2.1 wording under the heading “ITC from a trust” has been revised to include that only graduated rate estates and communal organizations that are deemed to be inter vivos trusts can designate an ITC to their beneficiaries. A previous note at the end of this section has been removed as the 20% ITC no longer applies after 2013.

Section 2.3.3 has been revised to only include discussion on the ITC carry forward of 20 years based on legislation applicable to 2008 and later tax years. The ITC from older years can no longer be claimed.

Section 3.1 has been revised to reflect the legislative changes resulting from the 2019 federal budget enacted measures, specifically the change in the calculation of the expenditure limit. For tax years ending after March 18, 2019, the use of previous year taxable income is removed as a factor.

Section 3.3 now only discusses the effects of the specified future tax consequences on the previous year taxable income, when calculating the qualifying income limit for the purposes of the definition of qualifying corporation.

Section 4.2 has been revised to remove the explanation of what meets the definition of qualifying corporation before February 26, 2008, as this no longer applies.

Section 4.2.1 has been revised to remove the explanation of what is the qualifying income limit for 2009 and previous tax years, as this no longer applies.

Other minor formatting and editing corrections were made throughout the document.⁶

Conclusion