SR&ED Multi-Corporate Claims – By Dawn Loeffler

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Dawn Loeffler, BA (Hons), CPA, CA Staff Accountant, Gilmour Knotts
Dawn Loeffler, BA (Hons), CPA, CA Staff Accountant, Gilmour Knotts
Dawn Loeffler, BA (Hons), CPA, CA
Staff Accountant, Gilmour Knotts

Tax Question:

Should a Scientific Research and Experimental Development (SR&ED) project involve staff and resources from multiple corporations?

Facts:

Often times companies join forces to work on a SR&ED project. Each company may have a specialty or knowledge that would be useful in pursuing the advancement. This is typically done through a Contract or Joint Venture.

Discussion:

Contract

If a company (Company A) is pursuing an advancement and hires the expertise of another company (Company B) through a contract to help pursue the SR&ED, Company A would file a SR&ED claim provided that Company A has the sole right to exploit the results of the SR&ED as per their contract with Company B. Contract payments are claimed at 80% of the eligible expense for purposes of SR&ED.

As a result of the SR&ED contract, Company B may also be eligible to file a SR&ED claim if their contract work meets the definition of SR&ED and their costs exceeded the contract revenue. Or if their work was to cover a different technological uncertainty and they would own the intellectual property of that research. Company B would deduct the contract revenue they received from their expenses on their claim.

 Joint Venture

If two or more companies collaborate staff and resources to pursue SR&ED and each has a right to exploit the results of the SR&ED, they would file a joint SR&ED claim. In filing a joint claim, each company would claim their share of the SR&ED expenses but the written portion of the claim would likely be the same. There are overall limits on claims and the participating companies may also have to file additional schedules to allocate those limits.

If your company is involved in SR&ED, please contact us to discuss filing your SR&ED return.

Dawn Loeffler, BA (Hons), CPA, CA
Staff Accountant, Gilmour Knotts
Chartered Accountant.
Email: faqs@gilmour.ca
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