CRA Updates SR&ED While Developing an Asset Policy [2016-07-19]
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Updated Policy: SR&ED While Developing an Asset [2016-07-19]
Along with their recent update to the Scientific Research & Experimental Development (SR&ED) During a Production Run, the Canadian Revenue Agency (CRA) updated another policy today. The changes made to the SR&ED While Developing an Asset policy were to reflect the implementations set out by the 2012 Budget.
The CRA explains the policy document as follows:
An asset can be a material, device, product, or process facility. SR&ED in a commercial environment may involve the development (design, construction, and testing) of an asset. Even if an asset arises from or is being used for scientific research and experimental development (SR&ED), it does not mean that all of the work (and the associated expenditures) on that asset qualifies for SR&ED tax incentives. The development and / or use of an asset can involve SR&ED work, a mixture of SR&ED and commercial work, or only commercial work.
This document presents the situation when there is SR&ED in the development of a new asset. Allowable SR&ED expenditures incurred for the development of an asset, such as, salary or wages, materials consumed or transformed, SR&ED contracts, overhead and other expenditures retain their nature, and each are claimed on the appropriate line of Form T661, Scientific Research and Experimental Development (SR&ED) Expenditures Claim.
CRA Explanation of Changes
Revision reasons
This revision accommodates the legislative changes that have been announced.
Revision overview
Expenditures of a capital nature no longer qualify for SR&ED tax incentives starting in 2014.
Appendix B.1 provides more detailed information about the changes made.
The following are the explanation of changes to the SR&ED while Developing an Asset Policy as part of the revision of July 19, 2016.
Section 1.0 was revised to include two paragraphs clarifying that this policy primarily covers the situation when there is SR&ED in the development of an asset. This policy document does not apply when an asset is used to carry out SR&ED.
Section 2.1 has been revised to reflect the legislative changes resulting from the 2012 federal budget measures with respect to expenditures of a capital nature. Expenditures for leased equipment and SR&ED capital expenditures made after December 31, 2013, do not qualify for SR&ED tax incentives. Because of the interaction of the definition first term shared-use equipment and second term shared-use-equipment, ITCs can be claimed in tax years ending before February 1, 2017, in respect of first term shared-use-equipment acquired before 2014.
Section 3.1 has been revised to reflect that expenditures of a capital nature incurred after 2014 no longer qualify for SR&ED tax incentives.
Appendix A.2Â ”CRA publications” has been removed.
Other minor formatting and editing corrections were made throughout the document.
 The full document is here.