The first quarter of the calendar year 2016 remained quiet with no updates made to the policies or related documents of the Scientific Research & Experimental Development (SR&ED) program. The judicial rulings, however, were busier.
As usual, the quarterly report is for the current quarter–Q1 (January to March 2016).
CRA Policy and Admin Updates
No updates were made this quarter.
Relevant Judicial Rulings
Rio Tinto Alcan Inc. v. The Queen (2016-02-16)
The appellant sought to determine if the Canadian Revenue Agency’s (CRA) reassessment of its SR&ED income tax credits (ITC) application was invalid. Two questions were asked to determine this. The first pertained to the CRA’s failure to review the facts of the application to determine its liability and assess the amount of tax payable on the basis of such a determination. The second question regarded the fact that the CRA made reassessments outside of the normal reassessment period for the fiscal periods in question. The court allowed the application, which allows the claims in question to be reevaluated.
This case is an example of the tax court of Canada (TCC) allowing applicants to question the decisions made on their applications when they feel an agent has made the wrong judgement. It is not uncommon for claimants to be under the impression that a CRA agent’s decision is the final word. Despite their authority, CRA agents are as susceptible to mistakes and poor judgement as everybody else.
ACSIS EHR (Electronic Health Record) Inc. v. The Queen (2016-02-26)
The appellant was seeking an award of costs concerning legal proceedings related to SR&ED eligible expenditures in a previous case (ACSIS EHR (Electronic health Records) Inc. v. The Queen, 2015 TTC 263). It made two settlement offers to the respondent, both rejected without counter-offer. The respondent’s proposal that any award of increased cost should be limited to 50% of the appellant’s fees was rejected on the grounds that the CRA had previously failed to participate in a meaningful way in the negotiation process.
The CRA was not only forced to reimburse ACSIS EHR for SR&ED costs (as judged by the initial court case) but for 95% of the costs incurred by ACSIS EHR during legal proceedings. The CRA’s refusal to negotiate is an important fact of the case; because the CRA could have avoided legal proceedings through negotiation, the judge ruled that legal fees were the CRA’s responsibility.
Summary of Quarterly Update
The CRA released no new updates in the first quarter. Two relevant judicial rulings, however, reminded claimants of their right to appeal decisions they feel are unjust, and the CRA of their responsibility to reasonable dialogue and negotiation with claimants.