Should a Scientific Research and Experimental Development (SR&ED) project involve staff and resources from multiple corporations?
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.
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.
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
Disclaimer: The information contained in this article is intended solely to provide general guidance on matters of interest for the personal use of the reader, who accepts full responsibility for its use. While we have made every attempt to ensure the information contained in this article has been obtained from reliable sources and accurately described herein. SW Media Group and Gilmour Knotts Incorporated is not responsible for any errors or omissions, or for the results obtained from the use of this information. Before taking any action that might affect your personal and business finances, you should consult a qualified professional advisor.