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Source: Canada Revenue Agency – SR&ED
The various guidelines and policies governing the SR&ED program‘s administration and legislation are subject to frequent change, making it vitally important to stay up to date on the latest SR&ED news. This week, we give you an overview of the progress of Federal SR&ED legislative proposals, the relevant sections of recent Income Tax Act amendments that affect the SR&ED program. The chart below can also be downloaded in PDF format.
The following table tracks the progress of outstanding federal draft legislation amending the Income Tax Act (ITA) that impacts on the Scientific Research and Experimental Development (SR&ED) Program.
Legislation receiving Royal Assent will be maintained in this table for up to one year from the date of assent.
The grey shaded areas represent Bills which ceased to exist from the dissolution of Parliament and must be reintroduced to Parliament.
On March 26, 2011 proposed legislation ceased to exist due to the dissolution of Parliament in preparation of a general election.
At this time, we [the CRA] do not know whether the proposed legislation will be reintroduced when Parliament resumes.
On July 16, 2010, the Department of Finance released draft legislative proposals to implement outstanding income tax technical measures. These measures were previously included in Bill C-10 and Bill C-33 which were introduced in the 39th Parliament.
The CRA will administer the proposed amendments as if they are law.
|37(8)(a)(ii)(B)(V)“Materials transformed” can now be claimed under the proxy method.Originally part of the December 20, 2002 Notice of Ways and Means Motion.||Materials under the proxy methodUnder the proxy method, the phrase “materials consumed” is changed to “materials consumed or transformed.” Also, the reference in the French version of subclause 37(8)(a)(ii)(B)(V) to “matériel” is changed to “matériaux” in the ITA.Effective Date: For costs incurred after February 23, 1998|
|127(27)(b),(c),(e),(f)Originally part of the December 20, 2002 Notice of Ways and Means Motion.||ITC can be recaptured on unpaid shared use equipment (SUE)Technical amendments include having an ITC recapture on a property even though the expenditure for the property was unpaid; this includes SUE. Also for the purposes of ITC recapture, “cost” was amended to “cost or a portion of costs” and there was clarification for the calculation of ITC recapture on first-term SUE and second-term SUE.Effective Date: For dispositions and conversions that occur after December 20, 2002|
|New section 143.3Stock option benefits can no longer be an expenditure.||Stock option benefit denial of expenditure The value of an option granted by a taxpayer is not considered to be an expenditure for income tax purposes. Also, the increase between the option price and the exercised share price is not an expenditure per paragraph 143.3(3)(b).News Release: 2005-080Effective Date: November 17, 2005|
|New subsection 220(2.2)
Requests for Ministerial discretion to file the prescribed Form T661 or prescribed information past the 18 months can no longer be considered.
|Removal of subsection 220(2.1) discretionUnder proposed subsection 220(2.2), subsection 220(2.1) does not extend to a prescribed form…or prescribed information filed on or after the day specified in subsection 37(11) or paragraph (m) of the definition of “investment tax credit” in subsection 127(9). The effect of new subsection 220(2.2) is that a person cannot deduct an SR&ED expenditure under section 37, or claim an investment tax credit in respect of an expenditure, if the person takes more than the additional 12 months allowed to make a claim with the Minister.Original release Technical Notes: 2005-080Effective Date: November 17, 2005|
|248(1)Definition of Scientific Research and Experimental Development (SR&ED), French version of the ITA.||“Engineering” work is among the work listed in paragraph 248(1)(d). The French version of paragraph (d) of the definition is changed to refer to “travaux de génie” instead of “travaux techniques.”It was never intended for there to be a difference between the English and French versions of the ITA.Effective Date: Upon Royal Assent|
|SourceThe details with respect to the proposed amendments to paragraph 2902(e) of the Regulations are provided in the history of the regulation as a Pending Amendment. It can also be found in the Department of Finance Technical Notes – Income Tax.*Archived News Releases click on: Draft Income Tax Legislation Released by Minister of Finance 1998-105 (October 27, 1998). Refer to the Explanatory Notes Appendix B page 309.|
|2902(e)||The provisions of paragraph 2902(e), define a prescribed expenditure to include, among other things, an expenditure for SR&ED where a claimant received or was entitled to receive a reimbursement.The proposed amendments to paragraph 2902(e) are consequential to the amendments to the definition of “contract payment”, in subsection 127(9), which renders the provisions of paragraph 2902(e), as redundant for ITC purposes.Effective Date: Applicable for amounts that became receivable after December 20, 1991|
*** This information is presented for informational purposes only and do not constitute legal advice. You should retain legal counsel if you require legal advice regarding your individual tax situation. ***
Make sure to keep checking back for future updates on federal SR&ED legislative proposals.