Minister of Finance Proposes Amendments Concerning the Income Tax Treatment of Certain Expenditures
Today the Minister of Finance tabled a Notice of Ways and Means Motion proposing amendments to the Income Tax Act.
Treatment of Employee Stock Options
It has been proposed that the amount of an expenditure allowable to a taxpayer, and upon which a tax credit or deduction may be claimed, is limited to the amount actually disbursed by the taxpayer.
The proposed amendment was made in response to the Alcan decision at the Tax Court of Canada in which taxpayers were allowed a deduction in respect of shares issued under an employee stock option plan. The amount paid by the employees was less than the value of the shares at the time they were issued, and the Court allowed the corporation to treat the difference as a scientific research and experimental development (SR&ED) expenditure qualifying for SR&ED tax credits.
The proposed amendments are designed to ensure that, for income tax purposes, no expenditure will be considered to have been made by a taxpayer except to the extent of an actual outlay or expense incurred by the taxpayer.
In general, this proposal applies to options granted and shares issued on or after today.
Treatment of Late Filed SR&ED Claims
It is proposed that the Income Tax Act be amended to ensure that a taxpayer cannot deduct SR&ED expenditures, nor be eligible for investment tax credits, if the taxpayer takes more than the additional 12 months allowed to make a claim under the Income Tax Act.This proposal applies to SR&ED and investment tax credit claims on and after today.
Although legislation has been in place for a number of years to deny investment tax credits that are not filed within the additional twelve month period, taxpayers were sometimes able to extend this period by filing a request under the fairness provisions of the Income Tax Act. Fairness requests will no longer be accepted for late filed claims.
