New court rulings trigger changes in Canadian R&D tax credit rules

The rules governing Canada’s system of R&D tax credits for technology business have already changed more in the last three years than in the previous 20. Disputes between taxpayers and the CRA on SR&ED have increased by a factor of 25 over the last seven years.

Now a new set of tax court rulings are causing the CRA to revise the rules that govern eligibility for SR&ED tax credits yet again. With corporate year-ends already well along, technology businesses that claim SR&ED credits need to know about these rule changes before they start their 2014 tax filings.

Scitax Advisory Partners LP is offering seminars in Montreal on March 17 and Toronto on March 24 that explain how to get the most out of SR&ED tax credits while avoiding disputes with the CRA over what qualifies. The seminars are aimed at R&D managers, company controllers and professional accountants responsible for leading the preparation of SR&ED claims and dealing with CRA afterwards.

The seminar leader is Scitax’s managing director David Hearn, who has more than 15 years experience in SR&ED tax credits. Over 200 slides will be presented plus two learning DVDs are included, covering excerpts from legislation and court rulings along with extracts from federal and provincial budgets.

“The situation on these SR&ED tax credits is in a tremendous state of flux with legislative changes, court rulings, and CRA policies all vying with each other,” Hearn comments. “The situation for 2014 year-end filings is particularly complex because certain changes from the 2012 federal budget are just now coming into effect, on top of which some provinces have recently piled on their own changes. All this can stack-up to leave companies with a whole lot less cash from tax credits this year and potentially a big hole in the bottom line.”

Hearn isn’t the only one who thinks the tax credit rules are tough to understand. In a Tax Court of Canada ruling issued last month, the Honourable Justice Judith Woods wrote, “The scheme of the Act in relation to scientific research expenditures is tortuously complex.”