Must satisfy ‘five-factor test’ to claim scientific research, experimental development expenditures

Tax - Income Tax - Tax Credits

Taxpayer was engineering firm specialized in developing public transit related technology. Taxpayer commenced its scientific research and experimental development (SRED) as early as 2010. Taxpayer made claims for various SRED expenditures and related investment tax credits with respect to 2013 and 2014 taxation years. Minister of National Revenue disallowed claim. Taxpayer appealed. Appeals allowed. Five criteria to assist in analysis of SRED activities were set out in 1998 judgment. Each of questions in “five-factor test” must be answered in affirmative. On basis of documentary and testimonial evidence it was found that taxpayer had satisfied five-factor test described in case law and that it was engaged in SRED activities during subject taxation years. Given taxpayer’s election to proceed under Informal Procedure, amounts at issue shall not be reduced by more than $25,000 per taxation year.

CRL Engineering Ltd. v. The Queen (2019), 2019 CarswellNat 1049, 2019 CarswellNat 949, 2019 TCC 65, 2019 CCI 65, Guy R. Smith J. (T.C.C. [Informal Procedure]).

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