The new SR&ED guidelines have come into effect as of August 13th, 2021. The previous definition from 2015 has now been archived by CRA. The definition of SR&ED, itself, has not changed and will remain the same. A company within Canada must explore scientific or technological advancements in the field of basic research, applied research, or experimental development by overcoming scientific or technological uncertainties.
CRA is focusing on a more concise definition for SR&ED eligibility. The new guidelines require a concise yet critical description of the WHY and HOW. The 5-question test is no longer enough with the new update. Let the trained staff at Braithwaite efficiently and effectively prepare your claim to ensure that it meets the latest policies and procedures.
The WHY Requirement
There should be a scientific or technological uncertainty, i.e., when it is unknown whether a given result or objective can be achieved due to an insufficiency of knowledge in open sources.
The HOW Requirement
How was the uncertainty resolved? A company must differentiate the eligible experimental work from the ineligible standard practice or use of available technology. This can be done by a hypothesis formulation after all standard approaches failed (or were found to be not applicable).
Common Misconceptions With Support Work
A common misconception is that support work in the form of testing, data collection, programming, design work, etc., are not considered SR&ED eligible. If support work is required to achieve the scientific or technological advancement, all work is eligible to be claimed. Support work on its own with no relation to the SR&ED project being claimed cannot qualify for SR&ED.
For a company to better understand if their support work could be eligible in the claim, the company should ask themselves, “was the support work undertaken to assist/modify/develop the scientific research or experiment work”.
Government of Canada, Guidelines on the eligibility of work for scientific research and experimental development (SR&ED) tax incentives (https://www.canada.ca/en/revenue-agency/services/scientific-research-experimental-development-tax-incentive-program/policies-procedures-guidelines/guidelines-eligibility-work-sred-tax-incentives.html)
Government of Canada, Eligibility of Work for SR&ED Investment Tax Credits Policy – 2015 (https://www.canada.ca/en/revenue-agency/services/scientific-research-experimental-development-tax-incentive-program/eligibility-work-investment-tax-credits/eligibility-work-investment-tax-credits-2015.html)
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