Canada’s Emergency Wage Subsidy
To help Canadian businesses who have suffered financial losses from the COVID-19 pandemic, the federal government implemented multiple programs to help citizens and businesses recover. The Canada Emergency Wage Subsidy (CEWS) was one of the subsidies dedicated to helping Canadian businesses.
This subsidy, released in April 2020, covers part of employees’ salaries and allows business owners to rehire laid-off workers. If your business was eligible for the subsidy, you may be wondering if it will affect your SR&ED claim. CEWS is viewed as a ‘government assistant’ in the eyes of CRA. The SR&ED program does not allow ‘double dipping’ into government assistance, so special consideration must be made to determine the amounts that overlap. For example, if your company had an employee who was dedicated to conducting SR&ED and your company has also submitted a CEWS claim for the same employee during the SR&ED claim period.
SR&ED’s Effect on CEWS
The Canada Revenue Agency announced that “assistance received under the CEWS reduces the amount of remuneration expenses eligible for other federal tax credits calculated on the same remuneration.” The CRA classifies CEWS as an income tax act generated from assistance from the government. As a result, companies can expect to receive a smaller SR&ED claim since under the tax act, companies can’t double-up on government funding. CEWS will only reduce SR&ED claims to the extent that a specific employee’s salary or wages are claimed as SR&ED expenditures. The CRA will base the reduction on the relative percentage of time spent on SR&ED-related activities versus the amount of time spent on non-SR&ED-related activities. Other government funding programs such as the NRC-IRAP could also be reduced to a similar amount.
How to File your Claim
For more information on your business’s eligibility for CEWS or SR&ED, contact Maxim’s experts. We are a premier consulting firm located in Markham, Ontario. With our solid representation with the CRA, we can help determine your eligibility and guide you through the SR&ED claim process for government incentive programs.