This post outlines SR&ED program updates from July-September 2020, including administrative, policy, tax law, and court cases. COVID-19 continued to dominate the country for the quarter, but slowly things began to reopen. We have identified some key trends to watch in the SR&ED environment.
The COVID-19 pandemic has impacted the entire world. The third quarter of 2020 saw the Tax Court of Canada (TCC) and Canada Revenue Agency (CRA) begin to open up and return to a semblance of normalcy with new COVID-19 restrictions in place.
SR&ED Education and Resources Articles
SR&ED Education and Resources spent the July-September 2020 summer months discussing the effects of COVID-19 on SR&ED, drilling down into the forms to explain the various key lines in our blog posts, in the interest of further de-demystifying the application process for researchers and claimants.
- First, we looked at if quality control and routine testing can qualify for SR&ED investment tax credits in Quality Control and Routine Testing in SR&ED Claims.
- Next, we looked at how different costs that corporations may face with relating to computers, software, and servers and if they are SR&ED eligible in Computer, Software, Server Costs and SR&ED.
- Additionally, we let our readers know that we are on social media and provided links if they would like to follow us in SREDucation on Social Media – LinkedIn! Facebook and Twitter.
- Next, we looked at patents and if reporting information on SR&ED forms is considered public disclosure in Patents and SR&ED – Public Disclosure?.
- We also provided a summary and analysis of the legal rulings from 2019 in Analysis of 2019 SR&ED Legal Rulings.
- Additionally, we posted a letter of support to the Canadian Advanced Technology Alliance (CATA) in Letter of Support to CATA.
- We also explained ways in which drilling costs may be eligible for SR&ED in Drilling Down: Are drilling costs eligible for SR&ED? It depends….
Following along the success of our Q2 blogs, we continued to focus on questions that our clients frequently ask during the course of the SR&ED claim process. These delve into topics of interest and serve to demystify the SR&ED application process for prospective claimants.
- To begin with, we explained writing tips for a great technical narrative in Six Tips for Writing Great SR&ED Technical Narratives.
- Additionally, we discussed the importance of documentation in Why do I need contemporaneous documentation for SR&ED?.
Stories of Survival from Canada’s Tech Innovators – CATA Series
In Q3, we highlighted a new series posted on the Canadian Advanced Technology Alliance (CATA) page titled “Stories of Survival from Canada’s Tech Innovators”.
- The first article showcased a firm called FluroTech who has found a way to apply their R&D work to COVID-19 testing in FluroTech: Stories of Survival from Canada’s Tech Innovators – CATA Series.
- Next in the series, we looked at an organization called Else Labs and Oliver, the “smart kitchen robot” in Success Stories: Stories of Survival from Canada’s Tech Innovators – CATA Series.
- Finally, we posted a story about AFTIA an example of “why tech firms can help drive economic recovery” in AFTIA: Stories of Survival from Canada’s Tech Innovators — CATA Series.
Administrative, Policy, and Legislative
The third quarter of 2020 brought some SR&ED news and information updates from CRA. While the program and policies remained constant, the CRA released information about the TCC reopening, as well as, an update stating that SR&ED filing deadlines have been extended in light of COVID-19.
- We provided an update from the TCC on their plan to resume operations in Updates from the Tax Court of Canada (TCC): The Current Plan to Resume Operations.
- Next, we provided information on proposed time limit extensions in SR&ED Time Limit Extension Proposal due to COVID-19.
- Additionally, we provided a summary of the new Fast Track Settlement Process in What is the Fast-track Settlement Conferences Process?.
From July-September 2020 the CRA posted two updates, one on August 13, 2020, and one on September 3, 2020, on their “What’s New – SR&ED Program” website.
On September 3, 2020, the CRA posted Extended SR&ED reporting deadlines explaining how reporting deadlines have been extended six months (in some circumstances) due to COVID-19. No deadlines have been extended past December 31, 2020.
In terms of judicial proceedings, Q3 was quiet with only four SR&ED court rulings released or on the docket due to the Tax Court of Canada’s closure due to COVID-19 for part of the quarter. Due to time constraints, only one of these rulings has been summarized, the rest will be posted in Q4.
National R&D Inc. v. The Queen (2020)
The Appellant filed an appeal of the assessment for their 2011 SR&ED ITCs. The CRA denied their project titled Project Tracking System, stating that it did not meet the criteria of SR&ED. The CRA denied ITCs for this project in the amount of $23,810. The judge used criteria from C W Agencies Inc. v. Canada (2001) to determine if the Appellant’s work was SR&ED eligible. The judge ruled that technological uncertainties and hypotheses were present. The judge also ruled that the scientific method was not followed which prevented the Appellant from meeting the additional criteria of SR&ED eligible work. The appeal was dismissed.
For more details and analysis, you can view our complete analysis of National R&D Inc. v. The Queen (2020). We also have a new blog post on the implications of this ruling and companies who utilize the Plan, Do, Check, Act (PDCA) in Plan, Do, Check, Act (PDCA) and SR&ED.
Summary of SR&ED Updates
SR&ED updates from July-September 2020 were busy as the country dealt with the pandemic. As in the prior three months, we continued our educational mandate, writing fifteen more informative blog posts. Check back for more updates as 2020 comes to a close.