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How The Canada Emergency Wage Subsidy (CEWS) Affects Your Companies Scientific Research and Experimental Development (SR&ED) Tax Credit Claim
By admin
Published On December 8, 2020
As many companies are dealing with COVID-19 this year, The Government of Canada has provided many programs to assist companies with cashflow. One in particular is The Canada Emergency Wage Subsidy (CEWS). CEWS was introduced (retroactive to March 15th, 2020) to cover a portion of an employee’s wages when a company saw a drop in revenue. If a company takes advantage of the CEWS program, they must inform CRA of the deduction when filing an SR&ED claim as you cannot double-dip. Below we provide an example of how CEWS would affect your companies SR&ED claim for the year.
A company in Ontario had one person dedicated to R&D to address the technological challenges arising from trying to enhance and expand its product. In the past, the company had submitted SR&ED claims for the work that had been done. COVID-19 struck and its revenue dropped dramatically resulting in the company being eligible for the CEWS program.
The person’s salary was $104,000 ($2,000/wk). To help support the researcher, the company received the maximum CEWS amount, $847/wk, for 12 weeks for the period of April 12 to July 4. The total received from the CEWS program was $10,164 (i.e. 12 weeks*$847/wk).
Without CEWS | With CEWS | |
Total Qualified SR&ED Expenditures for Investment Tax Credit Purposes | $161,200.00 | $151,036.00 |
Provincial Tax Credit | $18,086.64 | $16,946.24 |
Federal SR&ED Tax Credit | $50,089.68 | $46,931.42 |
TOTAL TAX CREDIT | $68,176.32 | $63,877.66 |
This means that even with CEWS for 12 weeks the company will receive a cheque for $59,014.30 (if no taxes are owing) and a non-refundable tax credit of $4,863 (ORDTC). The amount of $12,083 (OITC) is refunded and included in the $59,014.30 refund amount.
For more information on the CEWS program, please visit Canada Emergency Wage Subsidy (CEWS)
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