A review of the Government of Canada’s support programs for innovation, including SR&ED, is pending.
The Scientific Research and Experimental Development (SR&ED) Tax Credit program has experienced many changes in the last decade. The most notable change came with the 2012 federal budget announcement, which included decreasing the proxy amount allowed for labour expenditures; the allowance for arm’s length contractor expenditures; and the federal rate provided to large corporations.
These changes have wrought havoc on the associated review practices. Claimants are having a tougher time during reviews than ever before, and some industry advocates have questioned the CRAs objectivity, especially with their second-opinion and appeals processes. One change that came into effect in 2012, noted by industry advocacy group Canadian Advanced Technology Alliance (CATA) in a press release last month, was “fragmentation of a SR&ED project into multiple, small component projects related to individual uncertainties,” which led to a low-level perspective on what constitutes SR&ED.
“With the current low level focus it can be extremely difficult, particularly in ICT claims, to isolate ineligible work from work that is eligible to the satisfaction of the CRA’s reviewers,” the press release says.
The 2016 Ontario budget was announced earlier this month and resulted in some changes to the provincial tax credit rates. The 2016 Federal Budget was also announced earlier this month, which said a review of the Government of Canada’s support programs for innovation, including SR&ED, is pending. Russ Roberts, senior vice-president of advocacy for the Canadian Advanced Technology Alliance (CATA), was heartened by the prospect of such a review.
“We have been looking for such a review, particularly one that focuses on [Scientific Research and Experimental Development (SR&ED)] tax incentives, which are included, “ says Roberts. “They’ve brought in some interim programs while they do the review… [and] it also means an awful lot of work for all of us to bring good ideas to them over the next six months or so.”
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