This post outlines SR&ED program updates from October-December 2020, including administrative, policy, tax law, and court cases. COVID-19 continued to dominate the country for the quarter, but many businesses and agencies have found a new way to operate. We have identified some key trends to watch in the SR&ED environment.
The COVID-19 pandemic has impacted the entire world. The fourth quarter of 2020 saw the Tax Court of Canada (TCC) and Canada Revenue Agency (CRA) 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 updated our readers about the COVID assistance programs and how they may impact their SR&ED claim in CEWS and SR&ED – What you need to know.
- Additionally, we delved into a recent legal ruling and how it impacts those who use the plan, do, check, act in Plan, Do, Check, Act (PDCA) and SR&ED.
- Next, we looked at shipping costs and their eligibility for an SR&ED claim in Can shipping costs can qualify for SR&ED?.
- Additionally, we took a closer look at non-profit SR&ED corporations and how they differ from non-profit organizations in Non-Profit SR&ED Corporations – What are they?.
Following along with the success of our Q3 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 5 Red Flag Words That Cost Thousands in SR&ED. This guide will help the reader avoid words that the CRA does not want to see in your technical narrative.
- We also discussed how to carry back and carry forward ITCs at the federal level in SR&ED Carry Back & Carry Forward at the Federal Level.
- Additionally, we examined the pool of deductible SR&ED expenditures in Can you carry forward the Pool of Deductible SR&ED Expenditures?.
Administrative, Policy, and Legislative
The fourth quarter of 2020 brought some SR&ED news and information updates from CRA. The CRA released additional information about SR&ED filing deadlines in light of COVID-19. Ontario also made changes to align with the federal SR&ED filing deadlines
- First, we look at the 2020 Ontario budget and changes to SR&ED filing deadlines in 2020 Ontario Budget: Important Applications to SR&ED.
- Additionally, we updated readers on the most recent information to the SR&ED Filing Requirements Policy, reporting deadlines have been extended six months (in some circumstances) due to COVID-19. No deadlines have been extended past December 31, 2020, in Updates to the SR&ED Filing Requirements Policy.
From October-December 2020 the CRA posted three updates, one on October 30, 2020, one on December 1, 2020, and one on December 14, 2020, on their “What’s New – SR&ED Program” website.
On October 30, 2020, the CRA posted links to three new updated forms that removed references to capital expenditures:
The Canada Revenue Agency has updated the following forms and they are now available on Forms and publications:
- Form T661, Scientific Research and Experimental Development (SR&ED) Expenditures Claim
- Form T1145, Agreement to Allocate Assistance for SR&ED Between Persons Not Dealing at Arm’s Length
- Form T1146, Agreement to Transfer Qualified Expenditures Incurred in Respect of SR&ED Contracts Between Persons Not Dealing at Arm’s Length1
We will discuss these changes in more depth in an upcoming post.
On December 1, 2020, the CRA posted a link to the SR&ED Filing Requirements Policy which was updated on November 26, 2020.
On December 14, 2020, the CRA posted a link to the T4088 Scientific Research and Experimental Development (SR&ED) Expenditures Claim – Guide to Form T661.
In terms of judicial proceedings, Q4 was quiet with only three SR&ED court rulings released or on the docket. Due to time constraints, only one of these rulings has been summarized, R. c. Comparelli (2020) and Huang v Meng (2020) will be posted in Q1 2021.
Andre Lamy Medicine Professional Corporation v. The Queen (2020)
The Appellant and Respondent agreed that SR&ED eligible work was carried out during the taxation years in dispute and that the amounts are correct. The Respondent argued that Dr. Lamy carried out the research in his personal capacity, not the Appellant, Andre Lamy Medicine Professional Corporation. The dispute was if Dr. Lamy carried on these projects in his personal capacity. The judge ruled, “On the basis of these facts and the other evidence before me, I conclude that the Appellant performed the SR&ED. Dr. Lamy physically performed his research as an employee of the Appellant.”
For more details and analysis, you can view our complete analysis of Andre Lamy Medicine Professional Corporation v. The Queen (2020).
Summary of SR&ED Updates
SR&ED program updates from October-December 2020 were busy as the country dealt with the pandemic and how to resume operations. As in the prior three months, SR&ED Education and Resources continued our educational mandate, writing ten more informative blog posts. Check back for more updates as 2021 continues.
Share your thoughts on the recent SR&ED program updates
- What’s new – SR&ED Program. (2020, December 15). Canada Revenue Agency. https://www.canada.ca/en/revenue-agency/services/scientific-research-experimental-development-tax-incentive-program/whats-new-program.html ↩