SR&ED and COVID-19 Aid – What you need to know!

The COVID-19 pandemic continues to have a significant impact on all aspects of Canadian society, and businesses are no exception. Organizations have been challenged to be able to shift operation, deploy new technologies, and navigate their business plans in order to meet the needs of employees, customers and other stakeholders.

The Canadian Government stepped in to help many companies navigate through the pandemic through government assistance to re-hire and retain valuable employees as well as continue operations during these difficult times.

Programs such as the Canada Emergency Wage Subsidy (CEWS), IRAP Innovation Assistance Program (IAP), 10% wage subsidy are a few of the programs that were designed to help companies looking for financial support.

These programs allowed companies to continue with SR&ED eligible activities, however, the impact will be seen in the reduction of eligible expenses for SR&ED claims which primarily consists of salaries.

The reduction in SR&ED claims will only be to the extent that a specific employee’s salary or wages are claimed as SR&ED expenditures. For employees directly engaged in SR&ED, the portion of their salary that was cover by these programs will need to be deducted as government assistance. The amount of direct government assistance related to employees not involved in SR&ED activities will need to be reported as income.

The CRA will have challenges on how to best assess the effect on SR&ED claims for programs like CEWS and how it delineates between employees that are performing SR&ED activities and other employees. As such, it is imperative to have proper documentation and consult with experts on the best treatment of any assistance received. We are all here to work together to minimize the disruption of COVID-19 and continue to adapt and grow.